As investors prepare for the holidays, one item should stand out on their to-do lists: getting a handle on what markets can expect from the second administration of U.S. President-elect Donald Trump. While chaos is likely to be a feature, not a bug, of Trump 2.0, it’s still possible to glean insights into what may be coming down the pike.

One should, of course, consider the playbook from the first administration, campaign promises and post-campaign commentary.

But where things really get interesting is when you start diving into the roster of cabinet picks and political appointees likely to impact Trump’s economic agenda. Several have expressed views that appear to be at odds with either the president-elect’s proposed policies or the statements of other nominees.

Here are a few must-watch relationships that could define Trump 2.0:

First and foremost is the face off between the pro-growth and spending cut camps.

Scott Bessent, Trump’s pick for Treasury secretary, is clearly in the first group. He has summed up his economic plans with a reworked version of the late Japanese Prime Minister Shinzo Abe’s “three arrow” approach.

Bessent’s three arrows are 3% real GDP growth, a 3% federal budget deficit and 3 million bpd of additional fossil fuel production.

While the GDP target could conceivably be met, reducing the deficit to 3% of GDP seems improbable given that it is currently close to 7%. And the energy production target has been deemed quite unlikely by many, including Exxon CEO Darren Woods.

Bessent’s growth focus also appears at odds with the cost-cutting zeal displayed by Elon Musk, one of Trump’s key financial backers in the recent election and the incoming co-head of the newly created Department of Government Efficiency (DOGE).

One school of thought holds that the scale is tipped in favor of Bessent, given the tenuousness of the DOGE appointment and the fact that Trump has long championed growth and never displayed a passion for deficit reduction.

The president-elect may thus eventually ease Musk out in favor of pro-growth policies that would be popular with the business crowd he’s apt to rejoin after his second term ends.

However, the past decade has shown that it’s best not to underestimate Musk.

Beyond the growth debate lies Trump’s threats to slap massive tariffs on many major U.S. trading partners, including China, Mexico, Canada and Europe. Tariffs were central to Trump’s campaign and an area where presidents can exert significant authority.

Financial markets will be closely watching the internal battle pitting the pro-tariff president and core advisers including commerce secretary nominee Howard Lutnick against the more traditional economic camp, including Bessent and Kevin Hassett, the incoming director of the White House National Economic Council. The pro-tariff side may have the initial edge, but economic reality could change that.

WHAT’S PRICED IN?

As these debates intensify, investors should be prepared for unexpected, rapid policy shifts. Trump’s recent social media posts threatening to impose large tariffs on Mexico and Canada and an additional 10% on China were likely a preview of what’s to come.

But investors will recall the old market adage: it’s not the news but the reaction to the news that matters. In this case, the market’s immediate reaction was fairly muted, and within roughly a week, most asset prices were back to their pre-post levels, or even higher in certain cases including Chinese equities and the Mexican peso.

This suggests that investors, who have seen the Trump tariff playbook before, had either already priced in the possibility of new tariffs or weren’t taking the large numbers in the threats that seriously. Looking to 2025, investors searching for the best risk/reward opportunities should thus consider which potential policy scenarios are priced in and which aren’t.

The U.S. stock market is arguably priced for perfection, trading at a record relative valuation premium versus much of the rest of the world. While the risk of increased tariffs already appears to be priced into many non-U.S. markets, the potential positive policy responses to Trump’s threats – such as the likely easing of Germany’s “debt brake” and direct support for consumption in China – don’t seem to be.

Just look at the market reaction on Monday when China released a statement calling for “moderately accommodative monetary policy”. Multiple Chinese equity-related ETFs posted daily gains near 10%.

So when navigating the rush to year-end, investors should remain focused on their own to-do lists: scrutinize the debates likely to drive policy for the next four years, determine which policy scenarios are being priced in, and, potentially, consider a bit of travel to foreign markets.

Jay Pelosky is the Founder and Global Strategist at TPW Advisory, a NYC-based investment advisory firm.

(Writing by Jay Pelosky; editing by Anna Szymanski and Andrew Heavens)