Trump Assassination Attempt Sparks Market Volatility, Potential "Second Trump Bump"
The attempted assassination of former President Donald Trump on Saturday has sent shockwaves through financial markets, with investors speculating about a potential "second Trump bump" on the horizon. Jeremy Siegel, a renowned finance professor at the Wharton School, believes the markets are already anticipating a Trump victory in the upcoming November election, citing the former president’s pro-business policies and potential impact on economic growth. While this event has triggered significant market fluctuations, the long-term implications remain uncertain, raising questions about the potential for both economic gains and risks.
Key Takeaways:
- Trump Assassination Attempt: The attempted assassination of former President Donald Trump has raised the likelihood of his return to the White House, according to PredictIt, a popular predictions market, which saw the chance of a Trump victory rise to 66% on Monday.
- Potential "Second Trump Bump": The market’s bullish reaction is driven by the expectation that a second Trump presidency would promote economic growth through policies favouring free markets, deregulation, and pro-business initiatives.
- Market Volatility: The assassination attempt has spurred considerable volatility in the stock market, with investors attempting to assess the potential impact on the economy and political landscape.
- Tariffs Remain a Concern: While Trump’s proposed 10% tariff increase has raised concerns amongst investors, Siegel believes the market may ultimately shrug it off, viewing the tariffs as a bargaining tactic rather than a definitive economic policy.
Market Response and Analyst Views:
The attempted assassination of Trump has immediately impacted financial markets, with investors weighing the potential implications of a second Trump presidency. The S&P 500 initially exhibited positive momentum, driven by the expectation of continued economic growth under Trump. However, the trajectory of the market remains uncertain, with analysts highlighting a range of potential scenarios.
“The market, I mean, will prefer [Donald] Trump. He’s more free market, he’s antiregulatory, for growth,” Siegel told CNBC’s "Squawk Box" on Monday. "In the short run, I mean, as you all know, not only is it the question of are we going to let free markets and the entrepreneurial spirit of the economy bubble up as it did, I think during the first Trump term," Siegel continued. "I think that’s what the market is looking forward to now. Will there be a second time where those entrepreneurial spirits could rise and boost the stock market?"
Historical Perspective and Potential Economic Impact:
In the aftermath of Trump’s initial election victory in 2016, the stock market experienced a significant rally. In 2017, the S&P 500 surged more than 19%, buoyed by hopes that Trump’s tax cuts and pro-business policies would stimulate economic growth. However, 2018 witnessed a more subdued performance, with the index falling over 6%. This decline was attributed to concerns over a slowing economy, tightening monetary policy, and escalating trade tensions between the US and China.
The Impending Tariff Debate:
While the market appears optimistic about the potential for a second Trump bump, the specter of increased tariffs lingers. Siegel acknowledges that Wall Street is wary of Trump’s proposed 10% tariff increase. However, he believes that the markets could view these tariffs as a bargaining chip rather than a concrete policy, potentially diminishing their impact.
"They’re not thrilled about the tariffs," Siegel said of Wall Street. "But the truth of the matter is that Trump likes to wield the tariffs as a threat to negotiate better positions" on bilateral trade, and whether or not an across-the-board 10% levy is implemented on all imports is questionable, he said. Even if higher tariffs are imposed, "there’s a lot of things that, you know, certainly could offset that."
Assessing the Risks:
Despite the potential benefits associated with a second Trump presidency, the situation presents significant risks for investors. The ongoing trade war with China, coupled with potential economic headwinds, could lead to uncertainty and market volatility. Furthermore, the potential for political instability and unrest following the assassination attempt could negatively impact investor sentiment and market performance.
Conclusion:
The attempted assassination of Trump has triggered a wave of uncertainty in the financial markets. While investors are cautiously optimistic about a potential "second Trump bump," driven by the expectation of pro-business policies and economic growth, the path forward remains unclear. The market’s response will be heavily influenced by the outcome of the upcoming election, the evolution of trade relations, and the broader economic climate. Ultimately, the long-term impact of the Trump assassination attempt on the market will depend on a complex interplay of political, economic, and geopolitical factors.
