Where will Trump take markets?

Hi All,

Now that the election is behind us it is time to start looking ahead again. We've been guiding clients toward not taking any drastic measures going into the election and still hold that view today. I won't get into the data as many others have already posted but historical data tells us that red or blue does not dictate whether markets will go up or down. So we were not trying to time the market going into the election and we won't be trying to time it coming out.

We do believe that the party in charge does have the ability to give a nudge to pockets of the market which can help separate winners from losers on a relative basis. What we are seeing today is a first look at where the market sees the puck moving. I'd argue that today's movement is more representing rhetoric becoming reality and likely ignores a lot of the timing aspects and bumps in the road that may come into play going forward.

So what are we seeing and what do we believe. If today is an indication of what is to come (chart shows some proxies of some of these themes), Trump's next term may see

1. A broadening of equity upside across market cap and style with less Mag 7 dominance.
2. USD strength through higher rates, possibly influenced by tariffs and other trade negotiations
3. Pressure on China equities and potentially European stocks
4. Bank stocks and other financials (i.e. private equity) receiving a tailwind of favorable rates backdrop and reduced regulatory burden expectations.
5. Upward pressure on inflation expectations tied to trade and USD movement

If I had to place odds on what is most likely to occur in the near term I would say a reduction in regulation probably an area where the new administration has direct influence and there are fewer other competing factors to derail the influence. Areas like tariffs will face competitive pressure potentially in the form of foreign currency devaluation which may mitigate their overall impact.

All that said, it is still early days so we caution against the desire to trade reactively to news as it comes out. We expect to stay diversified and focus on developments that can drive earnings over the long term.

#Trump #Trumptrade #tactical #wealthmanagement