The atmosphere on Wall Street after the re-election of Donald Trump: keep the good times coming.
“This election was about whether you were more afraid of four years of the same or more afraid of four years of change,” Apollo Global (APO) co-founder and CEO Marc Rowan said at the Invest conference Yahoo Finance, adding that “the market verdict has been delivered.”
Rowan added: “I think this government has a remarkable opportunity to really turn the country around and take advantage of all the inherent positive qualities that we have.”
Rowan’s optimism matches that of the market, with the S&P 500 rising above 6,000 on the best post-election day of all time. The rally is based in part on Trump’s policy proposals around making tax cuts permanent and relaxing regulations, experts say.
But that rally and optimism may be ignoring a tariff-driven headwind.
The top 100 companies in the S&P 500, measured by market capitalization, generate an average of 8% of their turnover from China. If Trump’s proposed 60% tariff on Chinese imports comes to fruition, profit margins and stock prices could fall, although tariffs are more likely to double from current levels, according to Bloomberg Economics.
It’s a concern echoed by Deutsche Bank chief US economist Matthew Luzzetti on Yahoo Finance’s Opening Bid podcast (listen below).
“The markets are more or less telling you that Donald Trump is somewhat good for growth, somewhat inflationary,” Karen Karniol-Tambour, co-chief investment officer of Bridgewater Associates, said at Invest, warning that immigration restrictions and an increase in the budget deficit is inflationary.
To understand when the deficit devil over your shoulder becomes a zombie, BlackRock’s Rick Rieder looks at foreign demand at Treasury auctions. Despite these risks and high stock prices, he is still optimistic.
“The technicals of stocks are crazy… crazy good… I’ve learned over my career that the technicals win. You know, even if you believe in the fundamentals, the technical aspects win the most,” says Rieder at Invest.
A dovish cycle from the Federal Reserve, which the market thinks could push the US toward a soft landing, doesn’t hurt either. Although Judy Shelton, a former economic adviser and Trump appointee to the Fed, was reluctant to throw the Fed a victory party.
“We’ve seen the worst inflation in 40 years and when it comes to accountability … I don’t think anyone at the Fed has been fired,” Shelton said at the conference, also questioning the Fed’s role going forward.
“I think this is an interesting time when people are looking at the appropriate role of the Federal Reserve … and perhaps reconsidering whether we want … the interest rate … the price of capital — do we want it to be determined by a dozen people voting eight? times a year?” Shelton said, adding that she is also optimistic about Trump’s next presidency.
Bank of America (BAC) CEO Brian Moynihan sees potential policies under Trump as economically beneficial.
“I think what really drives the fundamental activity in the economy are the things that make America great. Capitalism. A consumer has a job and earns money and expenses, and credit is available everywhere. That’s what drives this capital market, and investors like everyone, the people here [at Invest] are setting [capital] work. And that makes America great. And having a set of policies to improve that is a good thing,” Moynihan explains.
My interview with billionaire climate investor and former 2020 presidential candidate Tom Steyer left investors on both sides of the aisle with something to be hopeful about.
“To a very large extent, it doesn’t matter” who is in the White House, Steyer argued. According to him, the dynamics of the free market will allow cheaper, faster and better products to prevail.
As Trump continues to announce Cabinet positions and the market reacts to how personnel choices will impact policy, investors may be wise to remember that, regardless of who is in the White House, stocks tend to rise over time. to rise.
(Disclosure: Yahoo Finance is owned by Apollo Global Management.)
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