In October, Nick Sargen, a Darden lecturer and chief economist at Fort Washington Investment Advisors, published Global Shocks: An Investment Guide for Turbulent Markets, a book that offered advice on managing investments through periods of unexpected turmoil.

One month later, Donald Trump upended expectations and stunned much of the world by becoming the 45th president of the United States.

Since then, Sargen said people regularly ask him the same question: “Does this count as a shock?”

The economist, who shared his answers with University of Virginia Darden School of Business alumni during a recent webinar, said he prefers the term “game changer.”

“Things are going to be different,” Sargen said, “His goals are not modest. His goals are fundamentally transforming the U.S. economy as we know it.”

Noting the politically charged times and the controversies surrounding the "President" Trump administration, Sargen cautioned that his investing outlook was divorced from politics, and derived solely from his expectations for the new administration’s actions.

Although markets have raced ahead in the months since the election, with small-cap stocks, in particular, enjoying a boost, recent movement into larger-cap, blue-chip stocks suggests that the initial unbridled enthusiasm may be tempered as investors seek more defensive plays.

Indeed, with the surprise of the election results fading, Sargen suggested investors will be watching four key issues:

  • Can the U.S. break out of its 2 percent growth rut?
  • Will businesses, many of which are flush with cash, come off the sidelines and begin to spend capital?
  • How much higher will interest rates climb and how much will the U.S. dollar strengthen?
  • How real are the threats of a U.S.–China conflict or a meltdown of the European Union?

The events will play out against a global economy that has strengthened in recent months.

“For the first time since 2011, there is synchronous, accelerating growth around the world,” Sargen said. “Europe is enjoying some of its strongest growth in quite a while.”

If, as many expect, business tax reform shapes up to include both a dramatic cut in the corporate tax rate and disincentives for companies to keep or move jobs overseas, business capital spending and high productivity could follow, ultimately paving the way for higher growth rates.

While the business community would likely applaud many of the tenets of a GOP-backed tax reform plan, Sargen cautioned that investors would be “fixated” how proposed tax cuts would be paid for, given the country’s record deficits.

“Stronger growth will not offset tax cuts, Sargen said. “Most economists say don’t kid yourself. That’s a free lunch and doesn’t exist.”

Sargen broke his near-term prognostications into what he termed “the good, the bad and the ugly” for investors.

The good is the tax and regulatory reform that the market clearly expects, the bad is the rising interest rates and the ugly could come in the form of a major trade war or the dissolution of the European Union.

Although it’s unclear what, if any, actions will come to pass, Sargen was confident in predicting an eventual end to the “remarkable calm” seen in the markets in recent years.

“We’ve seen a huge move with hardly any volatility. When we see legislation, that’s when rubber meets the road,” Sargen said. “Be prepared for increased market volatility.”