"Trump 2.0" Cabinet members and policy stance - Will the rise in US stocks continue?

moomooニュース米国株 wrote a column · Nov 27, 2024 20:03

This article utilizes auto-translation in some parts.

Three weeks have passed since the election, and investors are paying attention to the policy direction of the Trump administration. Trump 2.0 is nearly finalized, with most of the candidates for key economic positions such as Treasury Secretary and Commerce Secretary already decided.

"Trump 2.0" Cabinet members and policy stance - Will the rise in US stocks continue?

In this environment, US stocks continue to fluctuate. The 'Trump Trade' initially surged but retreated due to reflation concerns, and then rebounded. Since election day, $S&P 500 Index (.SPX.US)$ it has risen by 5.2%.

Deutsche Bank forecasts S&P500 to reach 7,000 by 2025.
Deutsche Bank predicts that the S&P500 will reach 7,000 points by the end of 2025, based on robust profit growth and strong supply and demand.

Barclays also raised its forecast to 6,600 points, citing the strength of the US economy, easing inflation, and the growth potential of mega-cap high-tech companies as supporting factors. These target values represent increases of 17.27% and 10.56% from current levels, respectively.

両銀行は、S&P500の利益を引き続きビッグテックが牽引すると見ており、ドイツ銀行は1株当たり利益（EPS）を282ドルと予測、バークレイズは271ドルに修正している。FRBの利下げ、低失業率、大規模な資本流入などの要因が指数をさらに押し上げると予想されている。

Continuity and change between Trump Administration 2.0 and 1.0
The economic policies of the Trump Administration 2.0 are continuing the 'America First' policy of the Trump Administration 1.0. Common points include support for domestic tax cuts and tariff increases, but the difference lies in the emphasis on government spending reduction and inflation control due to changing circumstances. This includes the extension and expansion of the 2017 Tax Cuts and Jobs Act, a 60% increase in tariffs on Chinese products, and inflation control through government spending cuts.

The 2017 Tax Cuts and Jobs Act implemented reforms to individual income taxes, corporate taxes, and adjustments to taxation on overseas earnings. However, in the Trump Administration 2.0, the plan is to extend the deadline provisions of this law, further expand the tax cuts, with the total amount expected to reach trillions of dollars. On the tariff policy front, they aim to impose up to 60% tariffs on Chinese products and up to 20% tariffs on products from other regions.

Policy differences in government spending are also a feature of the Trump 2.0 policy. While the 1.0 administration aimed at rebuilding manufacturing through increased military spending and infrastructure investments, the 2.0 administration prioritizes responding to inflation pressure, avoiding fiscal deficit expansion, and emphasizing government spending cuts.

It is expected that policy implementation under the Trump 2.0 administration will be quicker. With the Republican Party holding a majority in both chambers of Congress and fewer constraints on Mr. Trump, policies such as tariff increases on Chinese products that do not require congressional approval are likely to be executed promptly. However, policies like domestic tax cuts and substantial tariff hikes will require a phased implementation.

However, it is considered difficult to achieve all policies in formal governance. Contradictions between policy goals such as tax cuts and inflation control, as well as the risk of fiscal deficit expansion, may make policy implementation challenging. Flexible responses will likely be required in actual governance, especially regarding the policies of fiscal expenditure reduction and tough stances on China that were touted during elections as 'political correctness.'

Trump Administration 2.0 Policy Outlook and Impact
Vice President PenceThe Vice President does not have a position to command the cabinet or some important ministries, but mainly plays a role in assisting the President. Also, while usually not having voting rights, as the Senate President, they have the authority to cast a tie-breaking vote in the event of a tie in the Senate.

As of July, Mr. Trump, a senator from Ohio, has chosen former venture capitalist JD Vance as his vice-presidential candidate.

Mr. Vance's claims include the following:
- Supports the trade policy of 'America First'
- Advocates for increasing tariffs on imported goods

According to Autopilot data, Mr. Vance, whom Mr. Trump has 'nominated' as the vice-presidential candidate, mainly invests in American stocks through ETFs.
Related articles:Is Mr. Vance a U.S. Vice Presidential candidate! Which stocks are likely to benefit?

Secretary of the Treasury Scott Besent
The Secretary of the Treasury, apart from the Vice President, is considered one of the four most important cabinet positions in the United States cabinet. It is responsible for overseeing public finance, economic sanctions, supervision of the Internal Revenue Service, involvement in international economic diplomacy, and supporting the stable operation of financial markets.

Mr. Besent's main policies are summarized as the so-called "3-3-3" policy.
- Reduce the fiscal deficit. By 2028, reduce the budget deficit to 3% of GDP.
- Increase GDP growth to 3% through domestic tax cuts and deregulation.
- Increase daily production of 3 million barrels of oil or equivalent energy.

After being nominated as Secretary of the Treasury by Mr. Trump, Mr. Besent stated in his first media interview that the focus of his policy is to fulfill Mr. Trump's tax cut pledge, especially to make the first-term tax policies permanent and to abolish tax on tips, social security benefits, and overtime pay. Tax reduction policies are expected to support the profits of US corporate entities in the medium to long term, especially benefiting the countercyclical sectors with currently high effective tax rates.

Regarding the tariff policy, Mr. Besent is believed to be attempting to alleviate Mr. Trump's trade threats. Analysts predict that Mr. Besent is opening the era of "Mnuchin 2.0." Although Mr. Mnuchin could not prevent all tariff policies, he understood where the "red line" was and ensured the stability of the US bond market. The market expects the new administration's fiscal policy to be implemented gradually, and it is not expected that the tariff policy will be as radical as Mr. Trump promised during the election campaign.

Secretary of Commerce Howard Rutnick
The Department of Commerce is the largest agency within the US government, responsible for a wide range of duties including oversight of the economy, industry, and trade management. It is involved in funding new semiconductor factories, implementing trade restrictions, releasing economic data, as well as weather monitoring (the National Oceanic and Atmospheric Administration is also under the jurisdiction of the Department of Commerce).

In a statement announcing the appointment of Mr. Rutenic as Secretary of Commerce by Mr. Trump, it is suggested that Mr. Rutenic will have broad authority over Mr. Trump's trade policy. Furthermore, Mr. Rutenic was also stated to have "direct responsibility" at the United States Trade Representative (USTR).

The biggest feature symbolizing Mr. Rutenic is his presence as a heavyweight on Wall Street. Currently a 63-year-old billionaire, he serves as the Chief Executive Officer (CEO) of the financial services company Cantor Fitzgerald, and is also one of Mr. Trump's major campaign contributors.

His economic sector views include the following:
- Particularly supporting tariff increases targeting China
- Supporting income tax reductions
- Supporting cryptocurrency, and advocating that Bitcoin, like gold, should be freely traded worldwide without restrictions

Director of the Office of Management and Budget, Russell Vought
The Office of Management and Budget (OMB) is considered an important institution for overseeing the budgeting and execution of the federal government, enabling the President to control government financial plans. Mr. Vought, nominated by President Trump, may play a significant role in overseeing government budgets and reducing government spending. Mr. Vought has a track record of serving as the Director of the Office of Management and Budget during President Trump's first term.

During the election campaign, Mr. Vought served as a key designer of 'Project 2025.' This project, promoted by the conservative think tank The Heritage Foundation, aims to implement a series of conservative policies under the Trump 2.0 administration. This includes reducing federal spending, significant tax cuts, expanding presidential powers, and strengthening border controls. Although President Trump denies direct involvement with this project, some of the currently nominated cabinet members have been associated with the project, including Mr. Vought.

Mr. Vought's economic sector claims include the following:
• Advocating for reducing government spending and domestic tax cuts. Planning for a $11.3 trillion reduction in government spending and approximately $2 trillion in income tax cuts over 10 years.
• Proposing an increase in border control-related spending and a reduction in foreign aid.

Top officials from the Department of Government Efficiency, Mr. Mask and Mr. Ramaswami.
Tesla CEO Elon Musk and Vivek Ramaswami, who once ran for the Republican presidential candidacy, will lead the newly established "Department of Government Efficiency." The abbreviation for this department, "DOGE," is the same as the token symbol for the cryptocurrency Dogecoin that Mr. Musk has often mentioned.

Mr. Trump stated that Mr. Mask and Mr. Ramaswami will provide "recommendations and guidance," aiming to achieve a "more efficient and less bureaucratic small government" while coordinating with the White House Office of Management and Budget (OMB).

Key claims by the two top officials at the Department of Government Efficiency are as follows:
- Reorganization of federal agencies and reduction of federal government employees. Mr. Musk proposed reducing 428 federal agencies to 99 and cutting approximately 77% of the nearly 3 million federal employees.
- Reduction of government expenditures. Mr. Musk proposes cutting excessive regulations and wasteful spending, aiming to reduce $2 trillion in spending from the federal budget.

Other important positions:
Energy Secretary candidate Chris Wright supports traditional energy represented by petroleum and natural gas, arguing that fossil fuels are essential for promoting economic prosperity and reducing poverty. Additionally, he holds a skeptical stance on climate change, believing that there is no climate crisis.

As the Secretary of Energy holds the most influential position in the field of energy policy, the direction of the Trump 2.0 administration's energy policy has become essentially clear. Specifically, it emphasizes the promotion of oil and gas development and exports, which starkly contrasts with the new energy policy of the Biden administration.
Related stocks: $Chevron (CVX.US)$ $Exxon Mobil (XOM.US)$ $ConocoPhillips (COP.US)$

Doug Burgum, a candidate for the Secretary of the Interior, supports tax cuts. Burgum is running for the 2024 presidential election and advocated for the reduction of local property taxes and state income taxes during the election campaign.

Brook Rollins, a candidate for Secretary of Agriculture, supports market economy, advocates for reducing government intervention, and promoting innovation and free competition. Rollins argues that agriculture is a crucial component of the American economy and needs to enhance competitiveness through technological innovation and market-driven approaches. Furthermore, she promotes the application of technology in the agricultural sector, such as precision agriculture and biotechnology, to improve production efficiency and sustainability.

moomoo News Zeber
Source: moomoo, Bloomberg
This article utilizes auto-translation in some parts.