President Trump has proposed a new residency visa called the “gold card,” which would allow wealthy non-U.S. citizens to secure a pathway to American citizenship for a $5 million fee. This plan replaces the EB-5 Immigrant Investor Program, which is focused on job creation and requires a lower investment (recently increased to a level between $900,000 and $1.8 million) and is focused on job creation. The gold card, by contrast, is structured as a straightforward cash-for-residency model that seeks to bring immediate revenue to the federal government. The gold card also features a tax loophole. Typically, permanent U.S. residents and green card holders are required to pay income tax on their U.S. earnings and any income they earn outside the country, but gold card holders would only pay taxes on what they earn in the United States.
The administration has claimed that this program could raise $1 trillion by attracting ultra-wealthy foreigners looking for a stable home base. However, realistic estimates suggest that the potential revenue will be far less.
The EB-5 visa is historically issued to about 10,000 people annually (although federal bureaucracy has slowed that pace in recent years). There is a backlog of 60,000 people in line for the EB-5. Adjusting for a change in fees for the EB-5, assuming a streamlined entry, and expecting a similar demand to the EB-5, the gold card could generate $200 billion over Trump’s term, about five times the amount of the current EB-5 program.
This raises important questions for investors: How might the gold card affect stock and bond markets?
Economic impact: Direct revenue vs. broad growth
Direct revenue: Great, but not great enough
It would be meaningful if the gold card program generated an additional $200 billion of revenue for the U.S. government. However, as much money as that is, it would not have a transformative effect on the $28 trillion U.S. economy (as measured by Gross Domestic Product, or GDP). For comparison, the annual federal budget deficit has been close to or exceeded $1 trillion since 2019. While revenue from the program could help fund government projects or infrastructure, it will not by itself significantly alter the nation’s long-term financial position. (Of course, we know better than to consider just one variable alone.)
Indirect economic benefits: What investors need to know
Beyond direct government revenue, the gold card could generate economic activity in areas of interest to investors and business owners.
- Real Estate Growth: Many applicants will likely purchase U.S. property, particularly in cities like New York, Los Angeles, and Miami, boosting demand for high-end homes and luxury developments.
- Luxury Spending: Wealthy new residents will spend money on cars, jewelry, private schools, and travel, benefiting the high-end retail and hospitality industries.
- Business Investment: Some gold card holders may invest in businesses, startups, or financial markets, potentially creating new jobs and driving innovation.
- Job Creation: Even if there are no direct job requirements, increased investment in real estate, services, and luxury markets will support jobs in the construction, finance, and consumer sectors.
These factors could create localized economic booms, especially in areas that attract high-net-worth individuals.
How could this affect your investments?
If you are a stock and bond investor, you might consider how the gold card could affect market conditions. Let’s break it down by sector.
Stock market impact
- Financial Stocks and Real Estate Investment Trusts (REITs): Luxury homebuilders and banks with exposure to high-end mortgages may see a slight boost if the gold card attracts significant new capital into real estate.
- Retail with an emphasis on luxury: Companies that sell high-end goods, such as cars, luxury fashion, and high-end hotels, could see increased demand.
- Technology and startups: Some new wealthy residents may invest in U.S. technology firms or startups, providing capital to venture-backed companies. This could have a long-term positive effect on innovation-focused sectors.
- Broad market growth? Unlikely. While some sectors may benefit, the overall economic impact will be limited because the scale of investment is small compared to overall economic activity outside of the aforementioned sectors. The program is not large enough to drive significant stock market trends broadly.
Bond market impact
- Government Bonds: If the federal government directs gold card revenue toward deficit reduction, it could slightly reduce borrowing needs, which may help stabilize Treasury yields. Given the massive size of government debt, however, the effect would be minimal.
- Municipal Bonds: Some local governments in high-demand areas may see increased property tax revenue, which could support municipal bond stability in those areas.
- Corporate Bonds: Companies in the luxury sector may see better credit conditions if their revenues improve.
For diversified investors, the gold card is unlikely to be a game-changer. If it succeeds, it could provide modest tailwinds to specific sectors but will not significantly shape financial markets. The main benefits will be concentrated in urban centers and high-net-worth industries rather than the broader economy. If the program succeeds, keep an eye on investment opportunities in real estate, luxury companies, and municipal bonds.
The chances of a recession have doubled
The economy appears to be in a transition phase. That may be too generous of a statement; the economy seems to be falling off a cliff. The Atlanta Fed’s GDPNow estimate of GDP for the first quarter of 2025 is screaming just that. The GDP growth rate estimate recently dropped from 2.3 percent on February 19 to negative 1.5 percent on February 28. And then to negative 2.8 percent on March 3.
The last time the Atlanta Fed GDPNow estimate was negative was in July 2022.
Still, if U.S. GDP is negative this quarter, or even this quarter and next, it could be worse. I am not trying to downplay an economic contraction; any size contraction is significant. I mean, it might actually be worse.
As you remember from high school economics classes:
GDP = C (Consumption) + I (Investment) + G (Government Spending) + X (Net Exports, which is exports minus imports)
Whatever specific actions the White House takes, two of its plans—tariffs and austerity (the Department of Government Efficiency, or DOGE) —are negative for the economy in the short term.
Corporations have been ramping up imports in anticipation of higher prices due to tariffs, which will drag GDP in the first half of 2025. Less government spending will be a mathematical drag on GDP in the second half of 2025. Instead of a negative quarter or two for GDP growth, growth could be below trend for a more extended period rather than just ripping the Band-Aid off.
Making matters worse, monetary policy remains restrictive. Inflation has come down from its peak but has yet to hit the Federal Reserve’s target. Also, the Fed does not have clarity on the execution of the White House’s economic proposals. Interest rates will remain high and restrictive to the economy until the Fed sees an improvement in inflation and has more certainty regarding fiscal policy.
The housing market is another economic headwind. Pending home sales dropped to their lowest level since tracking began in 2001, and actual sales of existing homes remain at roughly a 15-year low. That is a symptom of higher mortgage rates and elevated house prices.
Also significant is that households may be tightening their belts due to rising prices and economic uncertainty. Consumer spending has declined to its lowest level since February 2021, raising concerns about the sustainability of economic growth.
Economists generally agree that the baseline odds of a U.S. recession occurring in any given year are about 15 percent. That is not sophisticated math at all: A recession occurs about once every seven years, and that ratio expressed as a percentage is about 15 percent. (As I said, it is not sophisticated math; it is as much of an admission by economists that we just do not know for sure when a recession will occur.) Going into the new year, the odds of a recession were at about that baseline. Today, the chances of a recession occurring in 2025 are closer to one in three. The odds of a recession have quickly doubled.
Alternatively, the U.S. economy could experience a year of stagnation and maybe not a “true” recession. A true recession typically needs two things: (1) the Fed aggressively choking off economic growth and (2) businesses and consumers pulling back so hard that investment and spending dry up. Neither of those conditions is entirely in place. The Fed’s monetary policy remains restrictive, but they have an easing bias. And although businesses and consumers are pessimistic, businesses continue to hire and expand. The consumer, however, is becoming exhausted, even if their debt levels remain manageable.
We are in a market that is digesting the big moves of the last two years. There will be volatility, but we are not yet staring down a major market collapse or recession. If anything, I see a growth scare reminiscent of the 2015 to 2016 period.
In 2016, the economy grew 1.5 percent, the slowest growth since the Great Recession ended in 2009. From June 2015 through June 2016, aggregate earnings comprising the S&P 500 index fell by 3.12 percent. The result was that the stock market essentially went nowhere for 20 months, from November 2014 to June 2016.
Slower or negative corporate earnings growth can also affect multiples. Currently, the S&P 500 trades roughly 22 times trailing aggregate earnings. Investors have been paying up for robust growth (i.e., they have been paying $22 for every dollar of earnings). Even if earnings do not shrink, that could put pressure on stock prices as investors become less willing to pay for something that is not growing.
To me, that is worse than a recession and a stock market crash. I can try to sidestep the declines of an impending recession, raise cash in an investment portfolio, and then get that dry powder back to work again. A growth scare and a sideways market do not provide me with the same opportunities.
Allen Harris is an owner of Berkshire Money Management in Great Barrington and Dalton, managing more than $700 million of investments. Unless specifically identified as original research or data gathering, some or all of the data cited is attributable to third-party sources. Unless stated otherwise, any mention of specific securities or investments is for illustrative purposes only. Advisor’s clients may or may not hold the securities discussed in their portfolios. Advisor makes no representations that any of the securities discussed have been or will be profitable. Full disclosures here. Direct inquiries to Allen at AHarris@BerkshireMM.com.
