Finances financing prospects attain highest degree since February 2020 following Trump's victory

U.S. President-elect Donald Trump holds an award during FOX Nation's Patriot Awards at the Tilles Center on December 5, 2024 in Greenvale, New York.

Michael M. Santiago | Getty Images

Optimism about household finances reached a multi-year high following Donald Trump's victory in November's presidential election, according to a New York Federal Reserve survey released Monday.

The number of households expecting their financial situation to improve in a year rose to 37.6%, up about 8 percentage points from October, the central bank's survey of about 1,300 household heads showed. This was the highest value since February 2020, shortly before the Covid-19 pandemic broke out.

In the context of increasing optimism, the share of those who expect their financial situation to worsen fell to 20.7%, a decrease of almost 2 percentage points from the previous month and the lowest level since May 2021.

The results follow Trump's victory on November 5, which will send him back to the White House for a second, non-consecutive term. The Republican has promised a series of lower taxes and deregulation to boost growth.

Although the macroeconomy has shown solid growth through 2024, consumers continue to be hampered by price increases, which led to a cumulative increase of more than 20% in the consumer price index inflation indicator under President Joe Biden.

Despite the increased sentiment, consumers' inflation outlook is still cautious, according to the New York Fed survey.

Inflation expectations for the one-, three- and five-year horizons all rose by 0.1 percentage points to 3%, 2.6% and 2.9%, respectively. The Fed is targeting inflation at 2% but is expected to cut its key interest rate by a quarter of a percentage point at its meeting next week.

Although Trump has made little mention of attacking the government's debt and deficit burden, the outlook there has also improved. The average growth expectation for government debt was 6.2%, down 2.3 percentage points from October and the lowest level since February 2020.