US: Wall Street girds for Trump 2.0: Tariffs, tax cuts and volatility

With Donald Trump heading back to the White House, Wall Street is anticipating the potential for lower taxes, deregulation and a U.S. president who is quick to sound off on everything from the stock market to the dollar.
Trump made tariffs and tax cuts key elements of his pitch to voters, many of whom said the economy was the biggest issue of the election. Another important plank of his platform is expected to be deregulation in areas ranging from the banking industry to cryptocurrencies.

The promise of those policies appears to have already stirred prices for some assets, including the dollar, shares of regional banks and the price of bitcoin.
For a Trump administration, “markets are basically thinking it’s pro-growth, even if it comes with higher inflation and higher interest rates,” said David Bianco, Americas chief investment officer at DWS Group.
Edison Research projected on Wednesday that Trump had secured more than the 270 Electoral College votes needed to win the presidency.
While political developments can move markets, investors say they typically tend to take a back seat to macroeconomic forces and the health of corporate profits as well as global events.

For example, the S&P 500 rose nearly 70% during Trump’s first term as technology shares soared, even as his tariff policies sparked bouts of volatility. Meanwhile, the energy sector notched deep losses after global economies were paralyzed by the COVID-19 pandemic, although his administration was friendly to fossil fuel development.
HISTORY NOT A GUIDE?
Trump’s election in 2016 sparked a so-called reflation trade, with investors piling into an array of assets such as copper futures and shares of construction companies on the belief that tax cuts and other stimulative policies would boost sluggish U.S. economic growth.