Wall Street has a forceful response, although, of course, with blinders. The three indexes welcomed the winner, establishing new absolute highs.
Believe it or not, donald trump is back at the White House. How many lives does he have? One more. The king of negotiation has just closed his best deal at the polls. He will be the 47th president of the United States after the failure of his reelection in 2020 and his passage as number 45 between 2017 and 2021. He reached an agreement with the citizens that does not allow discussions, regardless of what his contentious past has been. (including the assault on the Capitol on January 6, 2021). He won the popular vote, not just the Electoral College. And thus he receives a resounding mandate. With control of the Senate, and quite possibly also the House of Representatives, Trump is within reach of repeating the 2016 sweep. But his current power is greater. The party belongs to him after having purged or subdued the wayward ones. He adds the management experience that he lacked then, and also a legion of officials to appoint who are loyal to him. Justice will stop harassing him. And he inherited from himself a Supreme Court whose rulings harmonize with his ideology of change, as demonstrated by the annulment of the Roe versus Wade ruling, referring to abortion, in 2022. How he will handle that immense power is the question.
Wall Street has a forceful response, although, of course, with blinders. It’s worth listening to because the word is where your money is. The S&P 500 index rose 4.6% in the week (the same as the Dow Jones). The Nasdaq, 5.7%. The three welcomed the winner, setting new absolute highs. For the first time, the S&P 500 exceeded the bar of 6 thousand points, and the Dow Jones, 44 thousand, although both closed slightly below. What better celebration? In his first term, Trump tirelessly strutted successive stock records. They were, in his opinion, the obvious corroboration of the quality of his government (at times, the only identifiable one). And, it is known, the Stock Market anticipates. Although, to tell the truth, the S&P 500 set 50 records so far this year. This is not an electoral novelty. It accumulates an advance of 25.7% in 2024. The bull market has already turned two years old and climbed 67% under the uncertain tutelage of “Sleepy Joe” Biden. Wall Street will have a Republican heart, but bipartisan pockets, one on each side of the pants. It prospered under Obama, under Trump and under Biden. With woke culture or without it. After the collapse of Lehman Brothers under Bush Jr., the secular bull market multiplied its prices 5.5 times. And he sees no reason for the saga to be interrupted. In any case, Trump will have to prove to him that this is overconfidence. At the moment, the records of Bitcoin and small caps tell the opposite, that the bonanza is widening.
Could Trump be a dictator – “only on day one” – as he joked on a Fox News show in December of last year? Wall Street doesn’t care. The bond market has more power, which has already shown him the limits of his electoral platform. Trump is a champion of raising tariffs, curbing immigration and deporting workers, and cutting taxes. His statements are direct and effective with the voter. But their fiscal and monetary arithmetic is poor. What will happen to the fiscal deficit and debt? Now with Biden the numbers do not close. The rise in long rates is a gentle warning of what awaits you if you want to force them further. If you push your agenda the wrong way, the bonds will oppose you. And what will happen to inflation if tariffs make the prices of inputs and tradable goods more expensive, labor becomes scarce, and the deficit skyrockets because revenue from tariffs does not compensate for the tax cuts? In Washington, the FED has been gentler than bonds. On Thursday, it cut its rate by a quarter point. I would have done the same if Harris won. “We don’t guess, we don’t speculate, we don’t assume” what policies are going to be implemented, Powell said. A candidate’s words are carried away by the wind. Let Trump decide what he wants to do. If autopilot prevails, the point map that projects lower rates throughout 2025 governs. If he wants to resign from Powell, the chairman will not leave. He noted that he lacks legal authority. His term only ends in April 2026. If he tries to impose his agenda and combat the rebellion of long rates by forcing the purchase of FED bonds, he must be fired. Trump also wants a weak dollar, and the currency market warned him that it will be strengthened through tariffs and higher rates. If he manages to get rid of Powell, the dollar will fall there. But the cure will be worse than the disease.
Wall Street is crossing its fingers that Trumponomics – a very popular diet, but with high cholesterol – manages to energize, as in its first term, the corporate animal spirits. Installed in the White House, the president must promote good cholesterol – deregulation, the reduction of state intervention and a better business climate – and not go overboard with the bad one. Trump is a real estate manager. It does not ignore the crucial role of interest rates or the vicissitudes of the economic cycle. You are the beneficiary of a healthy expansion that exceeded all forecasts, you will not want to ruin it because you are capricious. As a storm pilot he does not stand out. I should avoid them. He lost his re-election in 2020. He capsized with the crude adventure of the Capitol in 2021. And he ran for office on numerous occasions. Theirs is the art of negotiation and taking advantage. AND Its first rule is to impose bold offers that gain more ground than desired, and then allow concessions to be made that do not ruin the success of the mission. He already achieved this at the polls. Now you must negotiate with reality so as not to upset it and predispose it against. You do not need to remove your proposals from the scene, but you do need to sift them. Reduce the dose and stagger them without losing the personal seal of their symbolic value. If you use the financial markets as a compass, they will know how to set the coordinates for you.
Source: Ambito
