Post-shooting, investors are doubling down on a Trump second term
Market prices in a bigger boost to Trump than it did after stunning debate
The attempted assassination of Donald Trump at a rally this weekend has investors betting on stocks that are supposed beneficiaries of his presidency, as well as Republican political success more broadly.
On PredictIt, odds of Trump winning the presidency rose to as high as 68% versus 59% on Friday.
Investors are running back the “post-debate” playbook: the price action on Monday resembles June 28, the session after Joe Biden’s poor debate performance seemingly fortified Trump’s electoral prospects.
A thematic basket of stocks compiled by Goldman Sachs of companies that should benefit from Republican victory in the November election are having their best day of the year, up about 1.8% as of 10:40 am ET. They’re outperforming a basket of stocks that would purportedly stand to gain from Democratic political successes by the most this year.
Some companies poised to ride this political wave are posting large gains. Private prison companies GEO Group, and CoreCivic (formerly Corrections Corporation of America) are surging. So are Fannie Mae and Freddie Mac, which would stand to gain from renewed privatization efforts.
Private education firms such as Grand Canyon Education, and private college operator Laureate Education are also trading to the upside.
Coal companies Peabody Energy and Arch Resources are having strong good days, as some traders seemed to bet on reversal of some climate-related Biden administration initiatives.
On the opposite side of the ledger are shares of firms associated with Democratic policies priorities, including solar firms like Maxeon Solar Technologies, Sunnova Energy and First Solarand health-insurance companies that’ve built large businesses around Obamacare’s insurance plan exchanges including HCA Healthcare and Tenet Healthcare.
One big exception from this pattern: Shares of Trump Media & Technology Group are up over 30% this morning after inexplicably having fallen double digits the day following the presidential debate.
In the bond market, the spread between 2- and 30-year US Treasury yields uninverted this morning for the first time since January, driven by higher 30-year yields.
Higher odds of a Trump win aren’t seen as impacting the trajectory for the Federal Reserve’s policy rate in the near term, but are associated with a higher floor for – and more uncertainty surrounding – growth and inflation over the medium term.
“If the market senses that Trump’s chances to win are higher than they were on Friday — then we would expect the back end of the bond market to sell off in the manner we saw in the immediate aftermath of the debate,” writes Michael Purves, CEO and founder of Tallbacken Capital Advisors.
However, foreign exchange markets continue to defy Wall Street’s top prognostication for a second Trump term in office: US dollar strength.
The Dollar Spot Index is flat this morning, and down slightly against the euro — even as economists at Goldman Sachs spotlight the potential negative macro effects Trump’s economic agenda may have on growth and inflation outcomes in the euro area.
