Trump’s 2024 presidential bid was a new wrinkle for the markets

NEW YORK (Reuters) – Former President Donald Trump’s entry into the 2024 presidential race on Tuesday confirmed the world’s “worst-kept secrets” and created another variable for markets that some investors say remains a low priority for now.

Trump, who has launched relentless attacks on voting integrity in the United States since his defeat in the 2020 election, announced his bid at his home in Mar-a-Lago, Florida, apparently aiming to preempt his potential Republican rivals.

His impassioned televised announcement follows a disappointing showing in last week’s midterm congressional elections that many Republicans blame, and as the party nears a majority in the 435-seat House of Representatives.

“I don’t think the announcement means as much as people thought — and with a weaker showing in the mid-term, it reduces the likelihood of a nomination,” said Joshua Crabbe, Robeco’s head of Asia Pacific equities.

“The effect will only be on the right track if it gets good traction with the nomination.”

Politics has largely taken a back seat on Wall Street this year, as macroeconomic concerns and Federal Reserve policy have been the main drivers of markets.

Meanwhile, Trump’s announcement came as no surprise to investors, since the former president had been reporting that he might run again for some time.

“This has to be the worst cryptocurrency on the planet,” said Bill Stone, chief investment officer of Glenview Trust Company. “There are a lot of other things that take higher priority, although that can obviously change overnight.”

Of course, it is difficult to predict what kind of investment the next president of the country will face.

It is unlikely to bear much resemblance to the current period, or the backdrop to the Trump term, which ran from 2017 to 2021 and was notable for relatively low inflation and a less hawkish Fed.

“It’s the holy trinity of market oiling — stimulus, through deficit spending, low interest rates — easy money — and lack of regulation,” Anthony Scaramucci, former Trump White House communications director and founder of Skybridge Capital, said on the sidelines. conference in Singapore.

“But the flip side is that (investors) also know that it creates what markets absolutely hate: political instability.”

We split

In contrast to what happened during Trump’s previous bid, the rift within the Republican Party has some investors worried as well.

“If anything, his decision to run could exacerbate ongoing divisions among Republicans, with many blaming him for the poor midterm election results,” said Shane Oliver, head of investment strategy at AMP in Sydney. “These divisions may reduce the chance of a more market-friendly Republican administration getting the presidency in 2024, so some investors may actually see it as a negative for markets.”

The US stock market rose more than 50% between Trump’s surprise election victory in 2016 and his defeat in November 2020, despite volatility hotspots such as the trade war with China and the sharp but short-lived economic slowdown that accompanied the COVID-19 pandemic. .

The Republican president claimed credit for the rally, tweeting frequently about Wall Street’s performance.

Despite its recent rally, the S&P 500 (.SPX) It is down nearly 16% for the year as of Tuesday, after the Federal Reserve delivered a series of massive interest rate hikes in its attempt to combat inflation.

Investors are also watching Trump-related stocks as a gauge of the former president’s potential.

Shares of Digital World Acquisition Corp (DWAC.O)the blank check company looking to take Donald Trump’s social media venture public, fell 8.8% on Tuesday, while software developer Phunware Inc. (PHUN.O)Inc., which Trump’s 2020 re-election campaign hired to build a phone app, fell 4.7%.

Both stocks rose earlier this month on reports that Trump was considering a third attempt to buy the White House.

(Reporting by David Randall), Additional reporting by Vidya Ranganathan and Tom Westbrook; Edited by Lincoln Feast

Our standards: Thomson Reuters Trust Principles.

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