Trump. The Good, the Bad, and the Ugly.

Welcome to Capital Call! The OneFund newsletter.

Donald Trump will be the 47th President of the United States. This is likely good news for your private equity portfolio in the near term, regardless of your political affiliation.

Let’s talk about the good, the bad, and the ugly.

The good.

Trump is motivated to juice the economy. After running on what was essentially an “economy first” platform, Trump will need to deliver on his promises. In all likelihood, he’ll turn to many of the tools he employed during the beginning of his first term. Markets are optimistic, with the S&P jumping the day after his election.

Here are a few of the factors that are likely to push private markets higher.

1. Taxes: When Trump took office in 2017, one of the first things he did was lower taxes. What he will likely look to do now is extend those tax cuts that are set to expire at the end of 2025. This is an obvious boon to businesses and investors alike.

2. Less Regulation: When I ask executives if they would rather have lower taxes or less regulation, 9 out of 10 say less regulation. Less taxes are great, but the impact is limited. Less regulation enables faster, more efficient growth, which is theoretically limitless. Trump's first term was marked by a push to reduce regulation across most sectors. A second term might see further deregulation of industries like banking, energy, and healthcare, which could create more opportunities for PE and VC firms to invest in and restructure businesses.

3. Energy: Trump’s strong support for the fossil fuel industry and deregulation of energy policies made the U.S. a more attractive place for private equity to invest in energy projects, from oil and gas to pipelines and utilities. In addition, energy independence and potentially declining energy prices make the US a generally more attractive place for investment. Look at Europe, for example. When the Russo-Ukraine War broke out, Europe was plunged into an energy crisis specifically because they relied on foreign energy from unstable countries.

The bad.

There are a few potential negatives of a Trump Presidency that are important to be sensitive to going forward.

1. Tech M&A: While a Trump Presidency is generally good for M&A, expect to see increased scrutiny of tech companies in general. Republicans have been skeptical of the role of big tech, especially social media companies, for years, and this scrutiny is likely to extend to M&A review as well. This could limit exit opportunities for smaller tech companies and chill valuations in a small subset of the market. VC and Growth will need to be especially vigilant and resourceful when seeking liquidity opportunities for these types of businesses.

2. Renewables: Trump’s energy policy is very friendly to fossil fuels but not so much to renewables. Solar, wind, and other green energy investments that many infrastructure PE funds like to make will be taking a back seat in the years to come. In fact, many renewable deals inked over the last few months had clauses specifically allowing sponsors and limited partners to back out should Republicans take the Presidency and both branches of Congress. Since that has come to pass, expect to see not only the rate of growth for green energy deals slow, but some projects that were set to start be postponed or canceled entirely.

The ugly.

Okay, “ugly” is probably aggressive, but calling this section “The Uncertain” doesn’t have the same ring to it. Realistically, political considerations are rarely black and white in the financial markets. There are quite a few policies that could have mixed or unpredictable impacts on the private markets.

1. Tariffs: Tariffs are a double-edged sword. Morgan Stanley and others have pointed out that tariffs could increase consumer prices, reigniting inflation. However, these tariffs are likely to be a strong tailwind for US and allied manufacturers. For PE firms heavily invested in the right industries in the US, this will be a large benefit.

2. Deglobalization: Increasing uncertainty and tariffs will continue to drive the deglobalization of supply chains. The continuing need to build more robust domestic supply chains will help US-based manufacturing and companies involved in domestic and allied supply chains. However, for PE funds that invested in manufacturers abroad or companies heavily reliant on import/export, their investments will likely suffer.

So What.

While there are positive, negative, and mixed effects of a Trump Presidency on the private markets, overall, the impact is likely to be positive. What does this mean for investors? Regardless of your political tilt, stay focused on the long term. In the US, at least, markets are not likely to collapse any time soon. There is a lot to be optimistic about.

Thank you for reading.

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