An imminent Trump 2.0 administration in the wake of a Republican landslide win in the November Presidential election is already impacting asset prices.
To get a heads up on how a Trump 2.0 will better impact asset prices,
Let’s go back in time and zero in on how asset prices responded to a Trump 1.0 administration in November 2016.
On the first trading day, the overall market reaction to a Trump presidency was mute, but there were certain sector moves. Financials, especially banks and insurance companies, were the largest movers with substantial gains. Sallie Mae rose 37%, and Freddie Mac surged 97% within seven trading days.
Bonds and bond proxies, such as utilities and REITs, sold as investors anticipated an expansionary fiscal package and lower corporate tax rates.
The Trump bump also benefited the healthcare sector, particularly pharma and biotech, which experienced a rally. Analysts noted that the biotech ETF rose over 10% the day after the election, with Pfizer (NYSE: PFE) seeing a 7.1% increase.
“The Trump bump also benefited the healthcare sector, particularly pharma and biotech, which experienced a rally”
WIN INVESTING
Carbon energy, oil, shale gas and coal Traditional energy stocks, led by coal producer Peabody Energy, a coal mining company, jumped 50%.
Defence stocks also experienced a Trump bump.
The “Make America Great Again”, known as MAGA, stocks rallied with Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), Google (NASDAQ:GOOGL), and Amazon (NASDAQ: AMZN), all leading the way.
But not all stocks celebrated a Trump victory in 2016 with alternative energy stocks, and ESG stocks and EFTs were all dumped.
Markets interpreted a Trump win as America-first policy benefiting MAGA stocks, the domestic market, small-cap stocks, the dollar and traditional energy.
Despite the Fed’s political independence, Trump would also be hounding the Fed chair for low interest rates, which comes as no surprise.
“But not all stocks celebrated a Trump victory in 2016 with alternative energy stocks, and ESG stocks and EFTs were all dumped”
WIN INVESTING
Do you know any billionaire businessman who likes high interest rates?
Moreover, regulations, red tape and bureaucracy are a headwind and a headache for businesses and the enterprise community.
So it also comes as no surprise that a billionaire businessman who then becomes President would glee at the thought of being able to cut down public bureaucracy and replace the old clans of wealth administered by technocracy, with a new clan of wealthy plutocrats.
We could be witnessing infighting amongst the apex of Western elites, a kind of revolution at the head of the feast table, but how this benefits people lower down the food chain is unclear.
“People with IRS pension plans, stocks, cryptos, USD and US treasuries are feeling the Trump bump” – Win Investing
What is clear, the more MAGA assets an investor owns the wealthier they will become under Trump 2.0.
People with IRS pension plans, stocks, cryptos, USD and US treasuries are feeling the Trump bump.
“I am going to make our country rich again,” said Trump and so far the market believes him.
But can Trump 2.0 make trickle-down economics work?
If America’s first policy is about rebuilding a domestic industrial base behind a wall of trade barriers, which creates jobs at home instead of imports maybe he can pull that off too.
The US is blessed with natural resources, vast fertile lands, human capital and a military nobody wants to mess with, so it could isolate itself from the rest of the world, and watch everyone decline into chaos, misery and war still prosper.
Think back to WW2 when its industrial rivals Germany, the UK and Japan were destroying each other the US consolidated its power, its industrial base became wealthy by supplying the war machine, and its bankers financed the reconstruction.
Does Ukraine in 2024 feel like Poland in 1939?
What if Putin’s Russia, after invading Georgia in 2008, Crimea in 2014, and Ukraine in 2022, laments the former USSR and wants other former soviet states under its yoke and keeps on invading?
Can anyone else in the room see a pattern emerging here?
Europe could be in a vulnerable position with a Trump 2.0 presidency, either way you look at it
Pay protection money to the Godfather or get invaded by the other Godfather in the East.
“The world reserve currency, USD, rallied on a Trump 2.0 term”
– Win Investing
Trump 2.0 and the rally of all assets risk off and risk on
The world reserve currency, USD, rallied on a Trump 2.0 term.
The US Dollar Index (DXY) is up 1.3% on news of a Trump 2.0 administration. The Trump bump rally in the USD was almost immediately upon news of a Trump win.
Moreover, we see the same reaction to risk assets as in Trump’s first administration in 2016, with MAGA money fuelling most assets except for ESG stocks.
ESG investments could be in a world of pain, with the Trump administration favouring profits, being the fundamental motive for business and traditional energy stocks.
Trump will bury ESG, but it is already dead, some investors would argue.
Renewable energy stocks and clean energy indices took a significant hit as the market anticipated shifts in US policy, with the WilderHill Clean Energy Index dropping 6.7% —its worst loss since early August. Solar firms were particularly impacted, with Sunnova Energy down 52%, First Solar falling nearly 20%, and Sunrun shedding as much as 30%.
Tesla has emerged relatively unscathed due to Trump’s relationship with CEO Elon Musk, making it unlikely that the new administration would significantly disrupt the growth of Tesla.
What does the collective West signify with a Trump 2.0 administration?
Most G7 industrial economies are heavily in debt, with many stagnating and politics more polarized than ever.
Trump’s 2.0 America First policy makes the collective West less united.
What if Europe, particularly Germany, decides it is in its strategic interest to get along with resource-rich Russia as a trading partner and establish trading relations with Russia?
If Trump encourages Russia to do what the hell it wants, then maybe it will sell EU energy and natural resources. Then why would Europe see Russia as a threat, and what would the purpose of NATO be?
If Europe pivots east a trade war on the horizon could come next.
