Forget the Bloomberg terminal for now, the real action is in the relentless whirlwind of US politics.
In a staggering turn of events, an assassination attempt on Trump nearly two weeks ago sent shockwaves through the nation, but the drama didn’t stop there. President Biden, after steadfastly refusing to step down did just that over the weekend.
He endorsed Vice President Kamala Harris – a move that many argue should have happened from the start. This political maelstrom has left markets in turmoil, with the future of US politics looking more uncertain than ever.
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Initially, the markets rallied around Trump. His near martyrdom painted him as a heroic figure boosting market confidence in a Republican win. Analysts are still bullish on a Republican win, bolstered by Trump’s tough talk on supply chains with Taiwan and the tech industry’s outsourcing practices.
His “tariff guy” persona has sent small caps soaring, as investors bet on a resurgence of national supply chains and increased international tariffs under his leadership. Let’s not forget, Trump’s tenure saw stocks surge, thanks in no small part to his corporate tax cuts. Now, he’s teasing another cut—albeit a modest 1%—aimed at pleasing big business, reflecting his own businessman acumen[1].
Yet, the optimism is tempered by the reality that today’s economy is not what it was four years ago. Valuations are stretched, and risk premiums are high. Analysts from the FT caution that the economy’s current state limits any administration’s ability to enact sweeping changes.
This isn’t the roaring market of Trump’s early days; it’s a landscape fraught with uncertainties. Inflation alone in the US has proved sticky enough that markets are pricing in a September cut, however in the current environment even that is questionable.
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With Biden’s exit, the market recalibrated, now weighing a Kamala vs. Trump showdown. The S&P and NASDAQ saw moderate gains, clawing back from the previous week’s losses. Trump’s interest in sectors like energy, gold, oil, and tech has buoyed those markets. Conversely, Kamala Harris, a globalist stands in contrast to Trump, particularly on issues like imported AI chips and allowing imports into the US.
Kamala is poised to use imports as a democratic tool to leverage abroad collaboration, which is expected given the tensions across the world. Her campaign hints at a continuation of Biden’s economic policies but has offered little in terms of unique concrete economic strategy.
As this political rollercoaster barrels forward, traders and analysts must stay on high alert. The impact of these unfolding events on the markets is as volatile and unpredictable as the political drama driving them. Buckle up; this ride is far from over.
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