It's not just tariff anxiety. The market's whole bull case under Trump has been turned on its head.
Andrew Harnik/Getty Images
- The market had a tough week as investors were jolted by Trump's tariff moves.
- But trade policy isn't the only thing derailing stocks. Other parts of the bull thesis under Trump have also been upended.
- Investors are questioning everything from deregulation to the impact and timing of tax cuts.
Trade-war angst, stagflation talk, and a rush to safe havens: the high-flying Trump trade has completely reversed.
As US indexes sink deeper into the red this year, blame has fallen on President Donald Trump's tariffs, which have triggered macro-uncertainty and torn down the S&P 500.
With a risk-off attitude sweeping investors, one question may be top-of-mind: when will the market feel the impact of Trump's pro-growth agenda?
After all, the so-called "Trump bump" was spurred by bets that the new administration would be defined by deregulation and tax cuts, nurturing a pro-business environment that would uplift markets.
This optimism helped pull the S&P up over 7% from November to mid-February. Financials and other sector beneficiaries rose even higher, as did crypto, a regulation-burdened asset.
While markets gained, so did corporate sentiment. According to the EY Parthenon CEO Outlook Survey published in January, 56% of CEOs cited plans to actively pursue M&A activity through 2025, up from 37% in September.
But two months into Trump's presidency deregulatory efforts don't seem to be moving quickly enough to satisfy the market. Instead, Washington's sudden protectionist pivot has gone further than anticipated, with on-again-off-again tariffs on Canada and Mexico sending investors fleeing risk assets.
To Michael Reynolds, vice president of investment strategy at Glenmede, an extreme tariff scenario could cancel out the boost to GDP stemming from higher business activity amid less regulation.
Other parts of Trump's agenda are also being questioned.
Consider the IPO market. While positive corporate sentiment led to Goldman Sachs' prediction of a coming IPO "supercycle," it's yet to materialize.
JPMorgan wrote in January that it found no evidence that Trump's win spurred higher corporate activity, with the fourth-quarter pace of IPOs remaining low by historical standards.
JPMorgan
"People often look for a little bit of certainty on what government policy looks like before they start making big commitments like going public or engaging with M&A, and we have the feeling that a lot of C-suites are waiting for the dust to settle on what terms of trade look like," Reynolds said.
These trends might not be helped by the fact that Washington's anti-trust arm is staying consistent with the previous administration's close scrutiny of corporate mergers. Dealmakers already seem let down by Trump's antitrust nominee for the Department of Justice, Gail Slater, another Big Tech skeptic.
Even in areas where Trump has already pushed his deregulatory agenda, there's little to show for it in the market. A loosening of enforcement in the crypto industry hasn't translated into lasting upside for digital assets.
Even as Trump got rid of restrictive regulation of crypto banking and dropped legal cases against major firms, bitcoin is still down 4.3% year-to-date.
None of this says that the administration is waving off campaign pledges, only that policy sequencing matters. While markets are taking on tariff pains first, many still expect regulatory changes to buoy asset prices later in the year.
"We're only up to 50 days as a new administration, and there are review processes for taking existing regulations off the board," Reynolds told BI. "It doesn't seem like we're getting a lot of new regulations, which, in and of itself, is a bit of a reprieve from the prior administration."
Glenmede expects the coming deregulatory boost to provide a modest tailwind to growth and highlighted that small-caps stand to benefit most from changing rules.
Bank of America, in a note, also suggested that investors stay bullish on this theme and recommended investing in sectors most hard-hit by stringent regulation, including consumer discretionary, commodities, transport, and capital goods.
from Business Insider https://ift.tt/t2qrHjW
via IFTTT
Comments
Post a Comment