Investors are keeping their cool and continuing their activity, as thoughts of a second Donald Trump presidency begin to emerge amid the failure of the prime-time debate between President Joe Biden and his supporters.
“The one thing we learned from last week’s discussion is that the market has somewhat come to terms with Donald Trump being the next president,” Bradesco’s chief equity strategist Ben Laidler said on the “Opening Show” podcast (video above or listen to it). here“We’ve seen the markets go up a little bit and we haven’t seen this volatility.”
Trump and Biden left debate viewers in a state of shock, with the former spouting lies while the latter appeared weak and out of touch with reality.
But since the debate aired on the evening of June 27, the S&P 500, Nasdaq Composite and Dow Jones Industrial Average have fallen only slightly.
Market leader Apple (AAPL) rose about 1.6%, while Amazon (AMZN) saw sideways trading.
Morgan Stanley strategist Mike Wilson says he received interest from clients in rotating 2016 “Trump trades” in cyclical and small-cap space the morning after the debate.
“Market expectations of fiscal expansion, inflation and deregulation under a Trump presidency were behind these initial moves, in our view,” Wilson said in a note to clients.
There is one area worth watching to see if Laidler’s thesis is entirely correct: the booming AI business.
Shares of AI leader Nvidia (NVDA) fell 3% following the discussion.
“I think investors look at the first Trump presidency and think it was very pro-business and made a lot of money — maybe we’ll see a repeat of that,” Laidler says.
Investors have generally enjoyed strong returns during the Trump presidency, despite various surprise events such as the Covid-19 pandemic and the Capitol storm, not to mention new tariffs on a major trading partner, China.
The Dow Jones Industrial Average has returned 56% during Trump’s presidency, according to data compiled by LPL Financial. The Dow hit 126 new highs.
The S&P 500 is up more than 50%.
Apple shares have risen more than 350% during Trump’s presidency, part of a broad rally in technology stocks.
Professionals say the gains were driven primarily by Trump’s tax cuts that boosted corporate profits, and the wealth effect from stocks that spurred consumer spending.
But those expecting sunshine and rainbows in a potential Trump presidency may want to temper their expectations, at least at first.
Wilson points out that the backdrop for stock markets is very different than it was in 2016.
“We are confirming that the cycle is more mature today than it was in 2016, as evidenced (among other variables) by the two-and-a-half-year decline in the Conference Board’s series of leading economic indicators,” Wilson said.
“The market welcomed the evidence of inflation returning in 2016. Inflation was not a headwind for consumers in the way it is now, and the US economy was recovering from a manufacturing/commodity recession, helped by the prospects of a buoyant/recovery fiscal policy regime. Today, inflation is a significant headwind for consumers, and fiscal sustainability dynamics are at the forefront of the bond market’s mind.”
Ford (F) CEO Jim Farley says consumers may be a little nervous about the presidential election, but he doesn’t think it will significantly hurt auto demand. Check out Farley’s insights below in “Opening show‘ episode.
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Opening show List of episodes
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