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Investors are putting their money on the “Trump trade.” Here’s what that means.
As former President Donald Trump stretches his lead at the polls over President Joe Biden, investors are already laying bets on what Trump’s return to power could mean for the U.S. economy, stock prices, and individual industries and companies. Wall Street has dubbed such market moves the “Trump trade.”
A Trump presidency would bring “important macro and market implications, with the key impacts likely revolving around trade policy and tariffs,” Goldman Sachs analysts said in a report. For example, Trump’s plan to impose universal tariffs on U.S. imports would likely benefit companies that mostly do business here at home, as opposed to global players, according to the investment bank.
The so-called Trump trade “has to do with those companies viewed as being the primary beneficiaries of a Trump presidency and the agenda he has laid out so far,” JJ Kinahan, CEO of IG North America, told CBS MoneyWatch. “This is speculation — as we both know, what’s said and what ends up happening can be two different things.”
What’s driving up stocks?
Art Hogan, chief market strategist at B Riley Wealth, also sounded a cautionary note. “The things that get said and proposed on the campaign trail are often difficult to put into place once you get to 1600 Pennsylvania Avenue,” he said.
Hogan also advises against making stock predictions based on an election more than 100 days away. “Even if I could tell the results right now, I still couldn’t tell you what is going to do well,” he said.
“The economy drives earnings, and earnings drive stocks,” said Hogan, who attributes the market’s upward drift this year to S&P 500 earnings and expectations that the Federal Reserve could cut its benchmark interest rate in September.
“The assumption that we would continue with tax cuts and lower interest rates — which we were going to have anyway — is behind the recent run higher in small-cap stocks,” he added.
Investors also think Trump’s return to the White House would mean less regulation, a potential tailwind for heavily regulated sectors such as banking and energy.
At the same time, economists warn that Trump’s plan to erect stiff new tariffs and deport immigrants would likely cause a flare-up in inflation.
Which industries could benefit?
In his acceptance speech Thursday night, Trump underlined his intention to crank up production of fossil fuels, with Kinahan noting the Republican nominee’s repeated refrain of “drill, baby, drill.” That would make energy giants such as Exxon among the biggest gainers under a Trump administration eager to pump oil despite the growing fallout from climate change.
Another area that investors think has upside in a second Trump presidency is cryptocurrencies. Trump, once a critic of digital currencies, has more recently sounded bullish on cryptos, while his running mate, Ohio Senator J.D. Vance, has long been a proponent.
On Friday, shares of crypto-related stocks rose even as the overall market fell, with digital currency platforms Coinbase up nearly 8%, Marathon Digital advancing 5% and Riot Platforms ahead 6.5%.
Private prison stocks including Geo Group also have risen on Trump’s talk of “rounding up immigrants and putting them into detention,” Hogan said.
Trump moving markets
As investors size up the shifting electoral odds, Trump’s public pronouncements are already moving financial markets. Trump’s recent comments about jacking up tariffs on China and requiring Taiwan to pay for U.S. military protection this week triggered a sell-off in semiconductor, AI and other large tech companies, with even star performers like Nvidia taking a tumble.
“People forget that the 2018 tariffs put the U.S. manufacturing sector into a recession, and we’ve been in another one for the past two years,” Peter Boockvar, chief investment officer of Bleakley Financial Group said this week in an email. “Another tariff battle is a bad thing. Another economic fight with the second largest economy is a bad thing.”
Still, the market’s knee-jerk reaction is likely to be short-lived, according to Wedbush analysts, who expect the tech sector to continue climbing in 2025.
“Our longstanding view navigating Trump politics and the tech sector is the political rhetoric during this political climate and Beltway races will be loud but, ultimately just like our view since 2016, the bark will be way worse than the bite on the U.S./China Cold Tech War fears,” they wrote.
Washington — Congress’ path forward on government funding is in limbo after House Republicans, with the support of Elon Musk and President-elect Donald Trump, torpedoed an initial deal to avert a shutdown before a Friday night deadline.
The House descended into chaos Wednesday when the GOP revolt sank a last-minute funding measure to keep the government operating through early next year.
The massive end-of-year spending legislation immediately sparked anger from conservatives when it was unveiled late Tuesday. Texas GOP Rep. Chip Roy referred to it on X as a “1,547-page Christmas tree,” while Rep. Kat Cammack, a Florida Republican, called it “a band-aid that is laced with fentanyl.”
The more than 1,500-page bill released Tuesday was far from a modest stopgap measure. In addition to extending government funding through March 14, it included disaster aid, health care policy extenders and a pay raise for members of Congress, among other provisions. The disaster relief portion of the bill came with a $110 billion price tag.
Elon Musk, the co-head of Trump’s advisory Department of Government Efficiency chimed in with a barrage of posts Wednesday calling the bill “criminal” and suggestions that Republicans who supported it did not belong in Congress. And the opposition culminated in statements from Trump lambasting the new spending and threatening a primary challenge against any Republican supporting the measure.
The president-elect called on Republicans to strip out the additional spending and added a new element instead — raising the debt ceiling. The debt ceiling, which limits how much the government can borrow to pay its bills, is suspended until the first quarter of next year, but Trump said he’d prefer to force President Biden to approve raising the debt ceiling so he wouldn’t have to sign it.
“I will fight ’till the end,” Trump wrote.
Top House Republicans met Wednesday night after the initial deal fell apart, but a new path forward remained unclear Thursday morning as Congress lurched toward Friday night’s deadline to fund the government.
Though stripping out most of the additional funding would satisfy many Republicans, Johnson is likely to need dozens of votes from Democrats, and some are already slamming Johnson for walking away from the agreement. They argue Republicans will shoulder any blame for a potential shutdown.
“Republicans have now unilaterally decided to break a bipartisan agreement that they made,” House Minority Leader Hakeem Jeffries, a New York Democrat, said Wednesday. “House Republicans will now own any harm that is visited upon the American people that results from a government shutdown or worse.”
Tom Williams/CQ-Roll Call, Inc via Getty Images
Spending fight throws Johnson’s speakership into question
The initial plan to keep the government funded and the chaos that surrounded it also prompted intense criticism of Johnson, including from members of his own party.
In addition to the slew of add-ons to the spending bill, conservatives are angry with Johnson for carrying out the negotiating process largely occurred outside of the view of rank-and-file members. Rep. Eric Burlison, a Missouri Republican, called the process “a total dumpster fire.”
A handful of Republicans indicated their support for Johnson’s speakership in the new Congress is now in question, and with such a narrow majority, it would take only a few to take him down. Rep. Thomas Massie, a Kentucky Republican, said flatly Wednesday that he won’t support Johnson in the speaker’s election.
“I’m not voting for him,” Massie said. “This solidifies it.”
In November, House Republicans backed Johnson to lead for another two years during their leadership elections. But the full chamber will vote to elect a speaker on Jan. 3. During the last speaker fight at the beginning of a new Congress in 2023, the slim Republican majority took 15 rounds to elect former Speaker Kevin McCarthy, who was ousted from the role nine months later, partly due to his handling of government funding.
Still, Johnson generally enjoys more favor than McCarthy with the president-elect, who wields widespread influence over House Republicans. Trump told Fox News Digital on Thursday that Johnson would “easily remain speaker” if he “acts decisively and tough” and eliminates “all of the traps being set by Democrats” in the spending package.
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Congress veers toward government shutdown after GOP revolt led by Trump, Musk
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