Takeaways from today's reading:
1. Trump must indeed be taken very seriously 20；2. Trump's strong candidacy could contribute to a strong ** before the election;
3. After Trump's victory, deglobalization, tariffs and a weakening of the dollar are possible;
4. The key question after the election: Will Trump pass the attack on major economic institutions?
Trump 20？
Yes, this will definitely happen. Now everyone understands this. None of Donald Trump's current dominance in the Republican nomination process, as well as his growing strength in the polls for the November election, were expected. In fact, at the beginning of last year, he seemed to be almost out of it. Now his chances are close to 50 50 and are clearly better than anyone. To prove how weak Biden is perceived, the third-ranked candidate for bettors, Michelle Obama, has 85% chance: Trump 20: It can happen.
So Trump is back, and Trump's second term may be a foregone conclusion for now. And, as the man himself will undoubtedly point out, the S&P 500 has set a new record, almost surpassing the 5000 level. Between now and the election, Trump 2How will the prospect of 0 affect the market, and what exactly will he change in order to make an impact in the nine months between now and the election that he still has to endure?
Despite the initial emergence of the opposite, attempts to pick and choose from either the Republican or Democratic Party have been resounding successes in the extreme polarization and ** of the past eight years.
But since November 2020, the S&P 500 has 53%, while the Nasdaq Green Energy Index (which may be positively correlated with the Democrats) has 27% and the S&P Oil & Gas Index has 230%, and under Biden, the defense and banks that are often seen as favoring Republicans over Democrats have both outperformed more than 66%. "These relative performances are completely at odds with the conventional political wisdom outlook because they relate to clean energy climate change, defense spending levels, and financial market regulation under the Democratic Party," he said. ”
Another example is to look at the rise and fall of clean energy since Trump won the election in 2016, almost contrary to what Trump (who emphasized his withdrawal from the Paris climate agreement) and Biden (who promised huge federal funding for alternative energy): Departments will not react to the election as most expected.
Long story short, it's really not worth trying **how the various political outcomes might affect the individual**. However, when it comes to asset allocation, things can be different.
How will this campaign affect the next nine months? The Fed will do everything in its power to help Biden, and that has been a welcome call. This presumably involves a rate cut, so Trump's growing political dominance has increased investors' confidence in the Fed's pivot bet. Jerome Powell and his colleagues have managed to dispel speculation that layoffs are coming next month and are dealing with heated questions about their independence. Cutting interest rates before it becomes apparently safe will only invite invitive from Trump and undermine any sense of independence on the part of the Fed. In any case, monetary policy will lag; It is unlikely that a rate cut now will improve the economy in any perceptible way before the election.
Therefore, the simple concept of the Fed cutting to help its friends in the White House looks far-fetched. But there are other ways in which politics can push the Fed. Before the 2008 crisis shattered confidence, Americans' holdings were almost back at their highs. This means that the so-called "financial effect" is real.
What will happen to economic policy after Trump's victory? In his first term, he appointed Powell, the current governor of the Federal Reserve, as chairman, although there are candidates who will represent a dramatic change in the status quo. Various Goldman Sachs alumni serve as economic advisers, overseeing a policy that is largely in line with Republican orthodoxy. But a second term can be very different. Trump said he would not reappoint Powell, and analysts brace for potentially sharp politicization of the central bank. For this reason, the Fed will be required to do the dragging work by buying bonds to stop yields from getting out of control – or, in other words, yield curve control, a kind of financial repression. The direct impact can be quite good; The long-term impact on capitalism is smaller. For others, the dollar will be weakened, which is okay for a populist second term, because it will be an effective increase in tariffs for other countries that want to import from the United States.
The main argument against this is that Trump may be crazy, but he is not stupid. His current plan involves the adoption of an administrative or "deep" state, so it can be said that institutional constraints will be weakened. But still.
Ian Harnett of the London Institute for Absolute Strategic Studies believes: I would have thought that whoever he appointed as finance minister would strongly advise against playing quickly and loosely with the world's reserve currency, which allows the United States to borrow at a lower ** on the global market. If you lose confidence in the U.S. infrastructure because of political interference in the Fed, then it will be a dearly price to pay. I doubt Trump** will do that; I think he might surprise people with a rather traditional choice.
In any case, they must be wary of the real possibility of Biden being re-elected in Republican Congress for a second term, which could lead to austerity, an outcome with very different risks. Any indication that Trump will fall into the position of this continuum will drive the market. Buckle up.
This article was written by John Auters, former chief market commentator for the Financial Times and author of The Terrifying Rise of Markets.