Incumbent candidates, which Donald Trump basically is, always get a big bump in the polls after their respective party conventions. Add to that the Biden Debate debacle and the attempted assassination of Trump, and Investors are betting that the former president may be poised for a landslide in November, the likes of which have not been seen in decades.
“The election is likely to be a landslide. This probably reduces uncertainty,” said Nick Ferres, chief investment officer at Vantage Point Asset Management, citing polls that showed a surge in support for Reagan after the attempt on his life in 1981.
World leaders and U.S. politicians condemned the shooting, while executives, including Tesla chief Elon Musk and hedge fund manager Bill Ackman, declared their support for Trump.
Before the shooting, markets had reacted to the prospect of a Trump presidency by pushing the dollar higher and positioning for a steeper U.S. Treasury yield curve, and those moves extended a little in Asia trade on Monday morning.
Ten-year Treasury futures dipped about 13 ticks, and the dollar rose on the euro and yen. U.S. stock futures inched higher.
Immigration and the economy have been the main issues for voters who, according to Reuters/Ipsos polls, see Trump as the better candidate for the economy, even as Biden seeks to benefit from solid growth, slowing inflation, and low unemployment.
Under Trump, markets expect hawkish trade policy and looser regulation over issues from climate change to cryptocurrency. Bitcoin is up roughly 7% since the shooting.
Investors also expect an extension of corporate and personal tax cuts, fueling concerns about rising budget deficits. That could drive bond selling, said Michael Purves, CEO of Tallbacken Capital Advisors in New York, and potentially add to inflation as interest rates fall.
“If (Trump) wins and does this stuff he said he is going to do, you are going to see a much bigger selloff in the back-end of the bond market,” he said. “I think the bond market is the big (election) trade this year, rather than equities.”
Trump also said in an interview in February he would not re-appoint Federal Reserve Chair Jerome Powell, whose second four-year term as chair will expire in 2026.
Overall, stocks have gained in the two weeks since the shaky debate from Biden, and both the S&P 500 (.SPX), opens a new tab and the Dow Jones Industrial Average (.DJI) opened new tab indexes hit record highs on Friday, and the S&P 500 is up 18% this year.
“Around the five presidential elections of the last 20 years, CEO confidence, consumer sentiment, and particularly small business optimism have shifted more favorably in response to Republican victories than Democratic victories,” analysts at Goldman Sachs wrote.
“To the extent improved sentiment leads to an increase in spending and investment, a Trump victory could boost the earnings outlooks for some firms even without substantial policy changes.”