For the markets, Biden was never a problem. And Trump is not a disturbance. Yes, it is an effervescent tonic for “animal spirits”. And an excellent addition. As long as the Fed is with us. Is a bubble brewing?
Wall Street added another barrage of records to its harvest, and there are so many that it is difficult to keep track. The king is dead! Long live the king! The S&P 500 index closed on Friday at all-time highs. A procedure that he carried out 57 times in the year. The Nasdaq followed suit (for the thirty-sixth time). Wall Street scored more records with Biden as president than with Trump as president-elect, but it is rainy and wet. Everything adds up. The Stock Market anticipates, and what it announces, is a bull market that is in very good health. He does not resent the change at the helm. Trump is a tumultuous volcano and Biden, a quiet man. It doesn’t matter.
A year ago, consensus forecasts projected an S&P 500 reaching, at this point, 4900 points. On Friday he nailed 6090. And where do you imagine it in twelve months? The standard prediction is in a range between 6500 and 6700 points. Deutsche Bank stretches to 7 thousand. Wells Fargo awards 7,007 points (a precision that derives exclusively from marketing and not from the calculation method). Let it be clear. Biden was never a problem. And Trump is not a disturbance. Yes, it is an effervescent tonic for “animal spirits”. And an excellent addition. As long as the Fed is with us.
Is a bubble brewing? No, let’s not jump to that conclusion so quickly, laments a recalcitrant bear, David Rosenberg. This week he admitted that after two years of ranting against the strength of the bull market (born in October 2022) it is best to step aside and not insist on fighting against reality. The bull market is exuberant, but perhaps, not “so irrational.” There are many reasons to be skeptical – from valuation, sentiment and positioning, all on exorbitant levels – but “the market is not stupid.” If it persists, it is because it foresees a period of higher productivity and its corollary of greater profits. Time will tell if he is right or wrong. Not Rosenberg, who will remain silent, even though he is not a convert. Of course, he now, thanks to the productivity thesis, likes bonuses a little more.
Biden-Trump: everything changes so that nothing changes?
Everything changes, so that nothing changes? It was already said in the campaign: the new president could live off the magnificent inheritance that the Biden Administration leaves him. It is so good that it doesn’t even have a registered trademark. With some makeup, Trump could pass her off as his own. Will he understand? Or how far will you want to raise tariffs and trade barriers, deport foreign workers and cut taxes, and call it into question? Will he fight with the Fed again?
The president-elect has already promised higher taxes on imports from China, Mexico, Canada and the BRICS. However, at the same time, the names of his economic team are all finance people. None of them have experience in customs. Even the Secretary of Commerce, the CEO of Cantor Fitzgerald. The 10-year rate fell 30 basis points since Trump signaled that Scott Bessent will take charge of the Treasury. Bonds stopped suffering. And the coins calmed down. Even as Syria burns and Macron’s government is on the tightrope. Although it is assumed that the central banks of Europe, Canada and Switzerland will lower their rates this week. It makes sense for financiers not to incite an interest rate storm. There will be no tariff or trade arrangement that will compensate for the damage.
At the DealBook Summit, Jerome Powellthe Fed’s boss, stated that the US economy is the envy of the world. The Economist said it first, but Powell handles the joystick. “And I’m going to do everything possible to keep it the envy.” There is no reason, he said, why it cannot continue like this. Well, a possible reason would be a reckless Trump fulfilling his campaign promises like an English lord. Bessent, who at one point spoke of organizing a parallel Fed, regretted the comment months ago. Powell feigns dementia and predicts a harmonious relationship with the new authorities. Thus, by omission, the image of a friendly Trump gains space. And nothing else is needed to spread the bonanza in the markets.
Trump-Musk: what to expect then from this extravagant collage?
Of course, Trump could preserve what was done and build on that foundation. He brings a pro-business hallmark that Biden did not have. And he is a champion of deregulation and increasing energy production. It represents an alliance with innovation, technological change and entrepreneurial initiative that justifies the enthusiasm. When Elon Musk -who plays as a libero- posts the need to put the exponential growth of public debt at bay and makes a very pertinent critical observation. Although it moves against the boss’s ultra-deficit fiscal platform. So what to expect from this extravagant collage? Wall Street is confident, and does not challenge the records.
Bitcoin goes without saying. That is a bubble, although rational and close to turning 15 years old. And Trump can be very good with the inflator. Dangerously. This is proven by the idea of creating a strategic reserve of bitcoins (a dead-end trap, which already has bipartisan support). And he knows how to communicate his intentions. It was enough to appoint Paul Atkins – “Paul Haul” – as head of the SEC for bitcoin – which cost 7 cents in August 2010 and 65 thousand dollars in September – to exceed one hundred thousand dollars. Trees don’t grow to the sky, but there are no physical limits to a digital asset. It is also to be expected from the financiers who surround him that they know how to apply the brakes on good sense in time. It would be irrational to allow the bubble to grow thanks to its installation in the heart of the financial system where today access is severely restricted. And not for nothing. We already saw with the Lehman crisis what the subprime mortgage debacle cost. But the temptation to build virtual pyramids everywhere is growing.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
