Lewis Krauskopf and Suzanne McGee
NEW YORK (Reuters) – Donald Trump’s inauguration on Monday could herald a more volatile period for markets, with Republicans appearing to move quickly on a wide range of issues including trade and immigration, which are expected to move asset prices.
Trump’s tariff plan could further fuel inflation concerns weighing on bonds and stocks, while efforts to tighten immigration controls could also resonate in these markets. The move to ease regulations is poised to boost assets including cryptocurrencies and bank stocks.
“The market will be very sensitive to this speech,” said Jeff Muhlenkamp, portfolio manager at investment management firm Muhlenkamp & Co. “Right now, everyone is trying to analyze every word and nuance coming from Trump or his biggest allies.” He said.
Some of the prices already include Trump’s expected policy goals, including tax cuts, deregulation and tariffs on foreign imports. The speech may also lay the groundwork for actions the White House will take in the coming days and weeks.
“Financial markets are ready to move on any indication that the new administration will pursue a different course than what has been reported so far,” said Doug Peta, U.S. strategist at BCA Research.
Stocks have typically had a lukewarm response to a presidential inauguration, but this time could be different given Trump’s unpredictability and ability to shake up markets with his comments, investors said.
Since its inception after World War II, the S&P 500 index has lost an average of 0.27%, with the index rising or falling about half as much on the day of the speech or on the first day of trading after markets are closed. According to LSEG data.
In January 2017, after Trump’s last inauguration speech, the S&P 500 index fell 0.3% on that day. U.S. stock and bond markets are closed on Monday (which is also the Martin Luther King Jr. holiday), so most trading reactions may not be evident until Tuesday.
The S&P 500 is up nearly 68% during Trump’s first term, but markets have been volatile due to Trump’s trade war with China.
The steam behind the Trump trade?
Of course, investors have been shifting their portfolios for months in response to the impending change in the White House, and so-called “Trump trading” has picked up steam even ahead of the November election, when he was leading in polls and betting markets.
For example, shares of Tesla, led by Trump supporter Elon Musk, have surged 60% since the November 5 election. Other gains include Bitcoin, which has surged more than 30% since Trump’s election amid optimism about a favorable regulatory environment; and private prison stocks Geo Group and Core, which are up about 100% and 60%, respectively, as investors anticipate possible immigration crackdowns. Includes CoreCivic. The need for detention centers increases.
