As former president Donald Trump’s 2024 election campaign appears to be gaining support following his attempted assassination and uncertainties in Biden’s campaign, the question of what the economy would look like under a second term of his presidency is becoming more prevalent, indicating a potentially significant change in financial markets.
In an interview with Bloomberg Businessweek, Trump assured he would avoid chaos in the stock market if he were to be elected again, possibly in a bid to appeal to Wall Street investors, mainstream businesses, and swing voters. He said he would probably keep Fed Chair Jerome Powell in the position through the end of a second term, “especially if I thought he was doing the right thing.” This would likely indicate a lowering of interest rates, Yahoo Finance reported.
Potential election scenarios could push earnings and inflation out of from the center of the country’s economists and investors’ top concerns, reawakening financial markets to the “Trump trade,” which would likely prioritize stocks, bond, cryptocurrencies, tariffs, and tax cuts.
Trump tried to assure investors there would be no unusual inflation caused by new tariffs, however, he did not clarify how this would be done. He also suggested that he’d consider JPMorgan Chase CEO Jamie Dimon for Treasury Secretary, a move that would place an emphasis on Wall Street industries and markets, if Dimon were to accept.
“‘Animal spirits’ have taken on a whole new head of steam because of this growing feeling that Donald Trump is going to emerge victorious,” economist David Rosenberg of Rosenberg Research wrote to clients on July 17. “No wonder investors are foaming at the mouth.”
Yet, these market shifts are also contingent on the proportion of Democrats and Republicans in legislative government, as even if Trump were to be elected, this would not guarantee a scenario in which the GOP wins both houses of Congress too.
Rosenberg said he views the GOP sweep scenario as a contributor to the recent investor rotation out of tech stocks into smaller companies deemed value stocks based on the theory that more tax cuts would help smaller shares catch up to the so-called Magnificent Seven.
If there were to be a Republican majority in the House, this would clear the way for more corporate tax cuts, something Trump has remained consistently steadfast on doing. However, Democrats would likely block this motion if they controlled at least one chamber of Congress.
