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The Trump Effect on the Stock Market

2 Mins read

In a recent social media post, former President Donald Trump boldly claimed that he is the reason behind the recent gains in the U.S. stock market. Trump’s confidence stems from his strong polling numbers against President Joe Biden, leading investors to project his victory and subsequently drive the market up.

Persisting records have been set as the Dow industrials DJIA and S&P 500 SPX reached all-time highs repeatedly throughout January. However, Trump did not shy away from pointing out the challenges that lie ahead. He emphasized that despite these stock market gains, other aspects of the economy remain troublesome, such as the situation in the Middle East and alarming levels of inflation.

Unsurprisingly, Trump’s comments drew criticism from the Democratic National Committee. They responded by accusing him of attempting to mislead voters and falsely take credit for President Biden’s successful economic recovery.

Analyst Tobin Marcus, from Wolfe Research, noted that investor interest in the policy implications of a potential second Trump presidency has increased significantly. With this in mind, Marcus highlighted the possibility of looser monetary policy under Trump’s leadership. However, he also cautioned that Trump’s approach towards the Federal Reserve may go beyond being dovish and enter into uncharted territory.

Clearly, the impact of Trump’s presidency on the stock market remains a matter of debate and speculation. Only time will tell how his policies and rhetoric will continue to shape the financial landscape.

Trump’s Fed Picks: A Shift towards the Unorthodox

The path of Donald Trump’s Federal Reserve picks has taken interesting turns over time, moving away from qualified individuals and leaning towards the unorthodox. This transition coincided with Trump becoming less influenced by his advisors who initially shaped his policy decisions. If Trump were to secure a second term, it is expected that this trend would continue. Marcus, head of policy and politics at Wolfe and former economic adviser to Biden during his VP tenure, shares this perspective.

Even the more traditional and well-qualified picks could face unpredictability when confronted with Trump’s persuasive tactics, known as jawboning. This aspect adds an additional layer of uncertainty to the decision-making process surrounding Fed appointments.

Meanwhile, Biden and Trump have engaged in a war of words regarding the stock market in recent weeks. The Democratic incumbent took aim at his GOP rival for his prediction of a market collapse. Conversely, Trump expressed his hope for a market crash in 2024 under Biden’s presidency, drawing parallels to the historic plunge in equities during Herbert Hoover’s term as president in 1929.

As traders analyzed earnings reports and awaited the Federal Reserve’s announcement on interest rates scheduled for Wednesday, the main U.S. stock indexes, including SPY, experienced a decline on Tuesday.

Now Read: Trump Tax Cut 2.0: Can It Further Boost Stocks?

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