The era of the “Trump trade” is nearing its end, leaving investors grappling with the potential impact of President-elect Donald Trump’s policy priorities on their portfolios. The question on everyone’s mind: how will Trump’s promises translate into actual policy actions, and what will that mean for the market?
The Wall Street Journal reports that investors are attempting to decipher which of Trump’s campaign pledges will materialize into concrete policy. This is a complex task given the wide range of promises, some seen as beneficial for the economy and stock prices (like lower corporate taxes and deregulation), and others viewed as potential economic obstacles (like immigration clampdowns and tariffs).
During his first term, Trump moved swiftly to implement policies that weren’t initially embraced by the markets, including stricter immigration rules and withdrawal from the Trans-Pacific Partnership trade deal. However, his firm stance on reducing illegal immigration and the eventual implementation of tax cuts and regulatory easing had a significant impact on the market.
Adding another layer of intrigue, Trump has hinted at appointing billionaire Elon Musk as his “efficiency czar,” suggesting a potential shift towards looser regulations reminiscent of the pre-Nixon era. While this move could be seen as a boost for businesses, the delicate balancing act of deregulation remains a concern for many.
While clean air, safe drinking water, dependable vehicles, and stable banks remain top priorities for voters, the task of determining which regulations to remove or uphold will require careful consideration. A hasty approach to cutting red tape could risk alienating a significant portion of Trump’s base.
Currently, investor sentiment is positive, with investors purchasing U.S. stocks and selling Treasuries, anticipating higher growth and less bureaucracy. However, the sequence in which Trump’s policies will be implemented remains unknown, casting a shadow of uncertainty over the market’s future.
Chris Brightman, CEO of Research Affiliates, points out that historically, stock markets have trended upwards for about 20 trading days following elections as uncertainty resolves. However, whether this pattern will hold true in the current scenario remains to be seen.
As the markets navigate this complex landscape, the challenge of discerning Trump’s true intentions and the potential impacts of his policies on investments will be paramount for investors. The future of the market could be significantly shaped by these decisions, making it crucial for investors to stay informed and prepared for whatever lies ahead.
