Last week, Donald Trump became the first former president to be convicted of a felony, but Wall Street remains optimistic about his chances in the upcoming November election. Investors are analyzing the potential impact of a second Trump term on financial markets, with some predicting a positive boost for stocks and the dollar.
However, his proposed tariffs and extended tax cuts could drive inflation and negatively affect U.S. government bonds. Despite his conviction for falsifying documents, which he plans to appeal, Trump is still legally able to campaign and assume office if elected.
Market analysts suggest a Trump victory could be beneficial for equities, particularly if he prevents the tax hikes proposed by Biden. Much depends on whether Congress remains divided or if Republicans gain a majority. Trump’s intentions to reduce the influence of financial regulators could also favor small-cap companies. Additionally, his support for fossil fuel production and a business-friendly environmental approach might uplift the energy sector.
However, his aggressive trade policies, such as high tariffs on Chinese goods, could pose risks by disrupting supply chains and escalating inflation.The options market indicates anticipated volatility around the election.
Meanwhile, Trump’s conviction has already affected his businesses, as evidenced by a 5% drop in shares of Trump Media & Technology Group. Trump’s campaign insists that his economic policies will curb inflation, reduce interest rates, and lower debt, benefiting Americans and investors alike.
Source: Vanguard