Trump’s better electoral chances after debate are already affecting markets | Wilnesh News
Financial markets are slowly starting to absorb the possibility of a significant shift in the once unpredictable presidential campaign. While it might be a stretch to call the June 27 debate between President Joe Biden and former President Donald Trump a watershed moment, the current president’s indecision and evasive performance has changed perceptions of where the race is heading. . The Republican challenger has emerged as the favorite in polling data and prediction markets, rising by mid-single digits in several recent polls, while Biden won’t even be in the running. Concerns linger about becoming the Republican nominee in November. That leaves investors in a quandary, wondering how to thwart a Trump presidency from an economic and market perspective. “As Trump’s approval ratings improved earlier last week, speculation began that a Trump victory would mean higher inflation in the medium to long term and a possible slowdown in the economy, which is why the yield curve is slightly steeper. That’s why long-dated bonds came under some pressure earlier this week,” said Mark Malek, chief investment officer at Siebert AdvisorNXT. “We’ll be watching this because there’s no clear direction yet, but we think the market is starting to try to resolve this,” he added. So far, the stock market reaction has been quite muted: The S&P 500 continues to hit record highs, albeit slowly, and is up about 1.5% since the last close before the debate. .SPX mountain 2024-06-28 S&P 500 Index Performance Since Controversy However, the bond market’s reaction has been a bit much. The benchmark 10-year Treasury yield has gradually declined and, perhaps more importantly, has fallen further below the 2-year Treasury yield. This phenomenon, known as a yield curve inversion, is a nearly reliable predictor of a recession, although the current inversion began in July 2022 and there has been no official recession since. The inversion has grown more severe in the past few days as Trump’s post-debate poll rebound signaled concerns about the economic outlook. Hindering Trump’s re-election Other market reactions to a potential Trump victory, as measured by Michael Hartnett, chief investment strategist at Bank of America: interest rate swings, bets to benefit as the yield curve steepens, banks and technology is the winner. Declining stocks included long-dated bonds, homebuilders, renewable energy stocks and emerging market currencies. Harnett also pointed out that the probability of Trump’s Republican Party sweeping the White House and both houses of Congress has risen to 36%. Reading the tea leaves, however, is difficult. Still, Trump’s first term as president and some of his campaign rhetoric have fueled speculation about what might happen in the future. “The extension of the 2017 tax cuts and former President Trump’s potential deregulatory agenda are weighing on the This is starting to be priced in by the market. “This is particularly good for the financial industry, which is expected to approve more mergers and acquisitions during Trump’s presidency. The possibility of more inflationary policies should also be closely monitored. “Reverse Goldilocks” reaction Inflation has been a major issue for Biden, as the consumer price index rose more than 19% during his term, compared with less than 8% during the Trump administration. But it was the president’s poor performance in the debates that sparked controversy, with some congressional Democrats and mainstream media outlets such as The New York Times calling for his ouster. On PredictIt, a widely followed but sparsely traded prediction market, the probability of Trump winning was about 59% as of Monday afternoon. However, Biden’s defiant comments that he will remain in the race have caused fluctuations on betting sites, giving him a 29% chance of winning, compared with Vice President Kamala Harris’s 15% chance of victory. Speculation has swirled in recent days that Harris could be on the ballot in Biden’s place, and before that changed on Monday, she had already surpassed his chances of becoming the nominee. However, PredictIt now gives Biden a 56% chance of winning the Democratic nomination, while Harris has dropped 12 points to just 31%. Chris Krueger, Washington strategist at TD Cowen, calls this week “Biden’s challenge” because it is critical to his viability as a candidate. “Biden remains the presumptive nominee … for now,” Krueger wrote, adding that Biden’s interview with ABC’s George Stephanopoulos on Friday was “a bit of a counterpoint. ‘s Goldilocks: “Enough to stay in the race, but not good enough” to alleviate concerns about eyesight. ” — CNBC’s Sarah Min contributed to this article. Correction: Mark Malek is chief investment officer of Siebert AdvisorNXT. An earlier version misstated the firm’s name.
