Donald Trump’s decisive victory in the 2024 presidential election sparked a global rally in equities. Investors filled the Trump-shaped hole in their vision of the future with hopes and dreams of lower taxes and less red tape propelling the planet’s biggest economy. By the end of the week, stocks were up 2.4% globally relative to election day.
America Inc is hopeful for a tax bonanza, but there are growing concerns it may be disappointed. There are mixed signals from various sectors. While some companies stand to benefit significantly, others might not be as fortunate.
American industrial giant ExxonMobil is pushing for the country to stick with the Paris accord, highlighting the conflicting interests in the business sector under the new administration. Taiwan’s chipmaker TSMC is balancing geopolitical pressures from America, China, and its domestic market. The landscape of big oil companies seems to be shifting too, with a possible softening stance on climate-change regulation.
In the sports industry, Nike and Adidas are losing their lead in running shoes to challengers like On and Hoka. Financial entities such as Elliott Management are driving significant structural changes, wanting to split Honeywell into two distinct entities. While Tesla is celebrated as a beneficiary of Trump’s business policies, it is clear that it is not the only company navigating the opportunities and challenges of this new political environment.
Stocks surge globally after Trump win
From tech to consumer goods, the ramifications of the 2024 election are still unfolding. Investors thought they had the whole “Trump Trade” figured out, until they didn’t.
What had been high hopes for growth morphed into worries about inflation and how the Federal Reserve might respond. Consequently, major averages have taken out a good share of the gain they achieved following Election Day. Traders have suddenly priced in fewer rate cuts ahead.
Chicago Federal Reserve President Austan Goolsbee underscored the tug of war that the market will have to wrestle with in the coming months. “As long as we keep making progress toward the 2% inflation goal over the next 12 to 18 months, rates will be a lot lower than where they are now,” Goolsbee said. However, he backed up Chair Jerome Powell’s statement that the Fed does not need to be “in a hurry” to cut rates.
The burst of euphoria after Trump’s win actually complicates the situation by providing looser financial conditions that might make the Fed slower to ease. Boston Fed President Susan Collins said the December cut is not “a done deal” though it is “certainly on the table.” Traders absorbed all the signals by taking a cautious view, selling stocks while also reducing the odds that the Fed will ease again in December. At one point, futures traders took the chances of a move at the Dec.
17-18 meeting to as low as 55% from well above 80% earlier in the week, according to the CME Group’s FedWatch Tool. Late Friday, the odds were around 58%, which makes the likelihood of another 25 basis point move essentially a toss-up.
