Following the horrific assassination attempt on Donald Trump this weekend, along with a sincere desire for national unity, we also wonder what a more likely Trump election looks like for equity markets and the US economy.
In reaction to the shooting, the possibility of Trump’s re-election has surged as Vegas odds climbed to 68% from 60% over the weekend. Despite these increasing odds, history shows that surviving an assassination attempt is far from a guarantee of winning an election.
On March 30, 1981, President Ronald Reagan narrowly escaped an assassination attempt outside the Washington Hilton Hotel. This was during a very tough market, with an economically-punishing Federal Reserve policy which was necessary to temper high inflation rates. Despite this, In the aftermath Reagan’s public image was bolstered significantly. This renewed public support contributed to his landslide victory in the 1984 election.
In contrast, on October 14, 1912, President Theodore Roosevelt was shot while campaigning in Milwaukee, Wisconsin. Remarkably, Roosevelt insisted on finishing his speech while wounded, declaring, “It takes more than that to kill a Bull Moose.” While his resilience captivated the nation, Roosevelt ultimately lost the 1912 election.
With the increased likelihood of a Trump victory, on Monday stock markets reacted positively with the S&P500 and Dow Jones Industrial Average reaching new all-time highs. Cryptocurrencies were also up nearly 5%. The US bond interest rate yield curve is continuing to steepen, signaling a healthier bond market and increased investor confidence.
Generally speaking, Trump policy is considered pro-crypto and market-friendly. In a hypothetical term, we envision Trump would continue to prioritize a healthy economy and market. During the pandemic in 2020, his administration responded aggressively to help keep the economy afloat, opening the government spending floodgates to help the ailing economy. We think Trump would continue to favor cheap energy policies that help US businesses and consumers. The US tax cuts that are set to expire in 2025 would likely be extended, avoiding the economic headwind of a tax increase.
However, there are risks of economic headwinds with a Trump presidency. A potential split-government with a Republican Executive branch and Democrat Congress could cause headwinds. Trump Tariff policy could hit U.S. growth as well. High government spending and increasing the debt to stimulate the economy would add to US debt concerns.
In conclusion, the increasing prospect of a second Trump presidential term has introduced market optimism. As we watch and prepare for the most likely outcomes, the only guarantee about this election cycle is that it will continue to raise eyebrows.
