Plenty of chatter on the business cable news channels and online press about the “Trump Trade.” The first time I heard this term, I was shuttled back to November 2016 when the business media proclaimed a “Trump Effect” on the markets. The media reported back then the market expectations of economic growth resulting from forecasted friendly policies toward business deployed by a business-friendly real estate developer out of New York.
On his way out of the door at 1600 Pennsylvania Avenue, the Trump administration touted its accomplishments, letting the public know that the bump was indeed real. Donald Trump’s Council of Economic Advisors reported that Mr Trump’s economic policies had exceeded forecasts for growth during his administration. The CEA shared that unlike most recoveries where there is acceleration in the first year and a tapering off in the addition of jobs due to already low unemployment in the next three years, acceleration in economic growth occurred more than seven years after the end of the 2008-2009 financial crisis.
The acceleration should have, as hoped by the Trump administration, dispelled the assertions that Mr Trump inherited a healthy economy from his predecessor.
Some market analysts are positioning themselves for another bump, according to reporting by MSN. One strategy that banks may employ is to sell long-term bonds and buy shorter-term Treasuries. Such a strategy would require help from the Federal Reserve where the Fed would have to cut its short-term rates.
As I discuss in a chapter about the president and the currency in my book, the Executive power is all about building, maintaining, and transmitting a narrative and the narrative is designed to win votes. Markets move on trader sentiment, and I believe that traders, like any other human being in a charged political environment, will fall back on values and human emotions, even though they are trained to exercise a non-emotional mindset.
All the more reason to ignore political noise and wait for the transitional period between November 6, 2024, and January 6, 2025, where traders should have a better idea of what may result from negotiations between the President-elect and the leaders of Congress.
Alton Drew
17 July 2024
For more of my take on the American political economy, buy my book at amazon.com/author/altondrew.com.
Lawyers Write the Bets. Bankers Sell the Bets. 