US pre-market trading begins on Sunday evening, with Wall Street making its first attempt to price in how the attempted assassination of President Donald Trump will affect the market.
Ian Bremmer, president of Eurasia Group, a political risk research and consulting firm, said the shooting at the rally made it more likely that Trump would win the election. Tesla CEO Elon Musk has already endorsed Trump, and Pershing Square CEO Bill Ackman said he plans to formally endorse him soon.
After President Joe Biden’s disastrous debate defeat last month, Wall Street began pricing in a Trump victory in November, sending bond yields soaring on expectations that tax cuts passed during Trump’s first term would be extended and the budget deficit would widen. Yields have then fallen sharply over the past week as new inflation data gave the Federal Reserve more room to cut interest rates in the near future and Fed Chairman Jerome Powell took an increasingly dovish tone.
But an assassination attempt could upend the political landscape regardless of whether it’s an election or not, and control of parliament and the size of the winning majority will also be important factors.
Inflation and the Fed
Analysts have warned that President Trump’s plans for sweeping tariffs, tax cut extensions and immigration restrictions will be inflationary, which could dampen expectations of more aggressive interest rate cuts from the Fed, which Citi Research said could lead to 200 basis points of relief.
Meanwhile, Chairman Powell and other central bank governors have maintained that the Fed is data-dependent and will not preempt expected fiscal policy moves, suggesting the central bank will stay on course until real conditions change.
However, stock and bond markets are influencing current financial conditions and tend to get ahead of expected policy. The Wall Street Journal report He said President Trump’s allies are plotting to weaken the Fed’s independence and that an election victory could raise fears that the Fed would buy more Treasury bills, stoking inflation and liquidating Treasury securities.
Former New York Federal Reserve President Bill Dudley He told Bloomberg TV He said last month that restructuring the Fed would not be easy, warning that “the mere attempt to control the Fed and weaken its independence could be a catalyst for market unrest.”
Regulation
Cryptocurrency investors boosted the price of Bitcoin on Saturday night, giving an early indication of how the election will play out. Trump is pro-crypto, but some Biden supporters have also resented the SEC and its treatment of the industry.
Mark Cuban was recently reported to have told a White House adviser, “You all have my permission to quote me as saying that Biden should fire Gary Gensler.” He confirmed the statement. luck “He’s the problem,” he added Friday.
Meanwhile, the Supreme Court could hand down a series of losses to regulators, giving President Trump and his Republican congressional allies more latitude to deregulate. It could also lead to more mergers and acquisitions if regulators become less skeptical of industry consolidation, a new development among tech giants to “buy and hire” AI startups to avoid regulatory oversight.
energy
If Trump wins, Biden’s climate change agenda will likely be replaced with one that favors fossil fuels — good for oil and gas stocks, but bad for renewable energy stocks.
The outlook for electric vehicle stocks may be more complicated. Biden will encourage domestic electric vehicle production and raise tariffs on Chinese-made electric vehicles. Meanwhile, some conservatives have dismissed electric vehicles as too “woke,” even as consumers have already shown a preference for hybrids and internal combustion engines in recent years.
President Trump has said he would repeal existing laws that support battery-powered cars. A big fan of the Tesla CybertruckMusk said some hedge funds aren’t sure what to do with Tesla shares.
Technology and Washington’s Limits
in Financial Times Editorial Days before Monday’s shooting, market veteran Ed Yardeni warned against assuming that lawmakers in Washington, D.C., are the main drivers of the economy and markets.
He noted that the economy has become more technology-driven, with more than half of capital investment now tech-related and corporate spending on software and research and development at record highs, but added that U.S. capital markets remain a source of funding for start-ups and innovation.
Yardeni predicted that this will boost corporate profits and propel the stock market to new highs over the next decade.
“History has shown that the US economy and stock market perform well in the long term, no matter who is in the White House,” he said. “That doesn’t mean that Trump 2.0 will be risk-free. There are two big risks under the Trump administration: a trade war that will stifle global growth and revive inflation, and an increase in the budget deficit that will cause a debt crisis. However, the US system of political checks and balances will continue to moderate the pursuit of extreme policies, no matter who is in the White House.”
