Premarket trading in the US begins on Sunday evening and marks Wall Street’s first attempt to price in how the Assassination attempt on Donald Trump will affect the markets.
Ian Bremmer, president of political risk research and consulting firm Eurasia Group, said the shooting at a campaign rally makes a Trump victory in the presidential election more likelyTesla CEO Elon Musk has already supported Trumpand CEO of Pershing Square Bill Ackman said he plans to officially endorse him soon.
After President Joe Biden’s disastrous performance in the debate last month, Wall Street began to factor in a Trump victory in November, and Bond yields rose on expectations that the tax cuts passed during his first term would be extended and would increase deficits. Then yields plunged last week when new inflation data gave the Federal Reserve more room to lower interest rates in the near future and Fed Chairman Jerome Powell sounded increasingly moderate.
But the murder attempt turns the political landscape upside down Both control over Congress and the size of the winning majorities play an important role on the entire ballot.
Inflation and the Fed
Analysts warn that Trump’s plans to introduce flat tariffs, extension of tax cuts and limitation of immigration will be inflationary. This could dampen hopes for more aggressive Fed rate cuts, which Citi Research expects to 200 basis points easing.
Powell and his fellow central bankers, meanwhile, have stressed that the Fed is data-dependent and will not act preemptively in anticipation of expected fiscal policy, suggesting that the Fed will maintain its current course until actual conditions change.
But the stock and bond markets play a role in the current financial situation, and they are quick to move ahead of expected policy. And amid a recent Wall Street Journal report However, Trump’s allies have drawn up plans to undermine the Fed’s independence, but a victory could raise concerns that the Fed could monetize U.S. debt by buying more Treasuries and stoking inflation.
While former New York Fed President Bill Dudley said Bloomberg TV Last month he said that transforming the Fed would not be easy, but warned: “The very attempt to take control of the Fed, to undermine the Fed’s independence, could be the spark that shakes the markets.”
regulation
Crypto investors were an early indication of how the election might turn out, as they caused the price of Bitcoin to rise Saturday night. Trump is pro-cryptocurrency, while even some of Biden’s supporters are pushing back against the SEC and its handling of the industry.
Mark Cuban reportedly recently told a White House adviser, “You all have permission to quote me when I said Biden should fire Gary Gensler.” He confirmed this quote To Assets Friday and added: “He is the problem.”
In the meantime The Supreme Court has inflicted a series of defeats on regulatorswhich may give Trump and his Republican allies in Congress more room to deregulate. It could also open the door to more mergers and acquisitions as regulators become less skeptical of industry consolidation. This is a new twist emerging among the tech giants to “Acqui-Hire” AI startups to avoid official control.
energy
If Trump wins, Biden’s policies to combat climate change would likely give way to policies that favor fossil fuels instead. That’s good for oil and gas stocks and bad for renewable energy stocks.
The outlook for electric vehicle makers’ stocks could be more mixed. Biden has promoted U.S. production of electric vehicles and is increasing tariffs on Chinese electric vehicles. Meanwhile, consumers have recently favored hybrid and internal combustion vehicles, while some conservatives have dismissed electric vehicles as too “woke.”
Trump has announced that he will reverse existing laws promoting battery-powered cars, but is also a “big fan” of Tesla’s Cybertrucksaid Musk. This has attracted some hedge funds no idea what to do with Tesla shares.
Technology and Washington’s Limits
In a Financial Times comment Days before Monday’s shooting, stock market veteran Ed Yardeni warned against assuming that lawmakers in Washington, DC, were the main drivers of the economy and the markets.
He noted that the economy is technology-driven, with more than half of investments going into technology, including record spending on software and research and development. At the same time, U.S. capital markets remain sources of funding for startups and innovation, he added.
This should benefit corporate profits, which will drive the stock market to new highs later this decade, Yardeni predicted.
“History has shown that the U.S. economy and stock market have performed well over time, no matter who is in the White House,” he said. “That is not to say that Trump 2.0 would be risk-free. The two big risks under a Trump administration would be: first, a trade war that dampens global growth and revives inflation; second, rising budget deficits that trigger a debt crisis. However, the American system of political checks and balances continues to work to moderate the extreme political aspirations of those in the White House.”