I hate politics. 

Politics are a full contact sport that brings out the ugliest aspects of human nature. And the political environment today is more toxic than at any other time in my lifetime.

Unfortunately for investors, the President and his/her agenda for the economy has a MAJOR impact on the markets. For those of us who want to make money from our investments, we have to address recent political events.

With that in mind, it is clear that Donald Trump will be the next U.S. President. That is not an opinion, it’s a fact: the betting markets give Trump a ~60% chance of winning. 

This will have clear implications for risk assets, specifically stocks.

Why?

Trump is the Ultimate Stock Market Cheerleader

First and foremost, former President Trump LOVES the stock market.

During President Trump’s first term, then-Treasury Secretary Mnuchin stated that the Trump administration viewed the stock market as a “barometer” for the economy. Put another way, with stocks, President Trump had a real-time measure he could point to when claiming that his agenda was benefiting Americans’ net worth.

Indeed, between 2016 and 2020, President Trump posted 256 tweets mentioning the term “market”, 162 tweets mentioning the terms “stock market” another 26 tweets mentioning “stocks,” 23 tweets mentioning “highs” in relation to stocks, and finally 15 tweets mentioning the “S&P 500” all on X (formerly Twitter).

All told, we’re talking about ~500 tweets touting the stock market in a four-year span. That comes to at least TWO tweets per week during Trump’s first term!

I do not anticipate this focus on stocks to change during Trump’s 2nd Term. Say what you will about Donald Trump, but he loves wealth. And the stock market is the 2nd most-owned asset class in America behind housing: 56% of American households have exposure to stocks vs. 65% who own real estate.

Moreover, President Trump has already figured out that the stock market is a segment of the economy that he can rapidly and dramatically influence via social media. To wit, dozens of times during the trade war with China during Trump’s 1^st Term he tweeted positive news about negotiations (oftentimes extremely vague) and stocks would rip higher.

The only thing Trump might love more than wealth is power. And the power to push stocks higher is one that I doubt he’ll forgo during his 2nd term.

With that in mind, it is very likely the stock market will push after Trump’s November win in 2024. This is particularly true when you consider the macro environment President Trump will inherit and create.

The Fed has already started cutting interest rates. So, Trump will inherit a stock market driven by Fed initiating a new easing cycle, at a time when the economy is still growing.

This is as close to a “goldilocks” environment for stocks you can get. And Trump will inherit this without lifting a finger.

Moreover, Team Trump has already leaked that they intend to pressure and potentially even assume partial control of the Fed via the Treasury.

This is what’s known as a “trial” balloon through which politicians gauge the public’s response to a potential policy.

I’ve posted a blurb from CNBC on the policy below…

This proposal is not surprising. From 2018-2019 Trump routinely harassed the Fed on social media, emphasizing that the Fed’s decision to raise rates and drain liquidity via Quantitative Tightening (QT) were harming his beloved stock market.

The below tweets are two such examples.

To recap…

1) The Fed was already talking about cutting rates before Trump took the lead in the polls. There is no way the Fed can reverse this intended policy path without drawing President Trump’s ire.

2) During his first term, Trump was extremely combative with the Fed, particularly any attempt by the latter to tighten monetary policy.

3) Team Trump has already leaked a document proposing several policies including

A) allowing the President to fire the Fed Chair prior to the end of the latter’s term,

B) giving the White House greater control over the Fed’s interest rate decisions, and C) using the Treasury to influence the Fed’s bond buying activities.

Considering the above items, it is clear that President Trump will have an even greater influence over the stock market during his second term.

Put simply, you could almost argue that “stocks going up” will be a Presidential Mandate!

How high could stocks go on a Trump win?

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