Like former President Donald Trump increases its lead in the polls Investors are already betting on what Trump’s return to power will mean for the U.S. economy, stock prices, and individual sectors and companies. Wall Street has dubbed these market moves the “Trump trade.”
A Trump presidency would have “significant macroeconomic and market implications, with the main impacts likely related to trade policy and tariffs,” Goldman Sachs analysts said in a report. For example, Trump’s plan to impose tariffs could have significant economic consequences for the United States. universal tariffs on US imports This would likely benefit companies that do business primarily here at home, as opposed to global players, the investment bank said.
The so-called “Trump trade” “is about companies that are seen as the primary beneficiaries of the Trump presidency and the agenda he has outlined so far,” JJ Kinahan, CEO of IG North America, told CBS MoneyWatch. “This is speculation — as we all know, what is said and what ultimately happens can be two different things.”
What Makes Stocks Rise?
Art Hogan, chief market strategist at B Riley Wealth, also offered a cautionary note. “The things that are said and proposed during the campaign are often difficult to implement once you get to 1600 Pennsylvania Avenue,” he said.
Hogan also cautions against making stock market predictions based on an election that is more than 100 days away. “Even if I could tell you the results right now, I still couldn’t tell you what’s going to happen,” he said.
“The economy drives earnings, and earnings drive stocks,” said Hogan, who attributes the market’s bullish drift this year to S&P 500 earnings and expectations that the Federal Reserve could cut its benchmark interest rate in September.
“The assumption that we would continue to cut taxes and lower interest rates – which was the plan anyway – is behind the recent rally in small-cap stocks,” he added.
Investors also believe that Trump’s return to the White House would mean less regulation, a potential tailwind for heavily regulated sectors such as banking and energy.
At the same time, economists warn that Trump’s plan to impose steep new tariffs and deport immigrants could likely trigger a inflation surge.
Which industries could benefit?
In his acceptance speech thursday Overnight, Trump stressed his intention to increase fossil fuel production, with Kinahan noting the Republican candidate’s repeated refrain of “drill, baby, drill.” That would make energy giants like Exxon among the biggest winners under a Trump administration eager to pump oil despite the growing fallout from the crisis. climate change.
Cryptocurrencies are another area that investors believe could be on the rise during a second Trump presidency. Trump, once a critic of digital currencies, has recently been bullish on cryptocurrencies, while his running mate, Ohio Senator JD Vancehas long been a supporter.
Cryptocurrency stocks rose Friday even as the broader market declined, with digital currency platforms Coinbase up nearly 8%, Marathon Digital rising 5% and Riot Platforms rising 6.5%.
Shares of private prisons, including Geo Group, also rose following Trump’s comments about “rounding up immigrants and putting them in detention,” Hogan said.
Trump moves the markets
As investors assess shifts in election odds, Trump’s public statements are already moving financial markets. Trump’s recent comments about increasing tariffs on China and requiring Taiwan to pay for U.S. military protection this week have triggered a selloff in semiconductor, AI and other big tech companies, with even star performers like Nvidia falling.
“People forget that the 2018 tariffs put U.S. manufacturing into a recession, and we’ve been in another recession for two years,” Peter Boockvar, chief investment officer of Bleakley Financial Group, said in an email this week. “Another tariff battle is a bad thing. Another economic battle with the second-largest economy is a bad thing.”
However, the market’s knee-jerk reaction may be short-lived, according to Wedbush analysts, who expect the tech sector to continue to climb in 2025.
“Our long-held view on navigating Trump politics and the tech sector is that the political rhetoric in this political climate and Beltway races will be loud but, ultimately, much like our view since 2016, the bark will be far worse than the bite on fears of a cold tech war between the United States and China,” they wrote.
