Trump shooting: How will this event impact the stock market and other assets?

The shooting of Donald Trump throws a major wrench into the 2024 US presidential election. Here’s a quick breakdown of what this could mean for investors:

Trump Media’s market value jumped by $1.9 billion on Monday morning, reaching a total capitalization of $7.8 billion.

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Trump Media’s shareholder base is largely composed of small investors who support the former president. This has led some Wall Street analysts to view the company’s stock performance as a gauge of Trump’s potential reelection prospects.

2. Future trend prediction or

Following Saturday’s shooting, members of a Truth Social group focused on DJT’s company predicted that the stock’s rise could continue, potentially leading to a “short squeeze” where short sellers, who had bet on the stock declining, would be forced to buy shares to cover their positions, further boosting the price.

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Trump encouraged the government to borrow more money while simultaneously pushing the Federal Reserve to lower interest rates. (This is quite different from the traditional Republican support for a “smaller government” and higher interest rates.)

During Trump’s presidency, the US deficit continuously expanded. In 2020, to address the pandemic, he spent heavily to offset the economic downturn.

Traditionally, there was consensus between the Republican and Democratic parties regarding the Federal Reserve’s monetary policy independence. However, Trump disrupted this system, influencing the Fed’s decisions both overtly and covertly.

Trump claimed in a campaign debate that the economy was phenomenal during his time in office, pointing to a combination of fiscal expansion and low interest rates.

The short-term effects were quite evident, and I believe he will repeat this strategy if elected. Debt issuance and fiscal stimulus will increase demand, while low interest rates inherently encourage inflation.

Therefore, if Trump is elected, inflation will likely be higher than under a Biden presidency.

More debt issuance will suppress US Treasury interest rates. Inflation naturally reduces bond prices (face value yield - inflation = real yield). A Trump presidency would be bad news for US Treasuries.

Conversely, the stock market would benefit from increased demand and lower interest rates.

Two good news: Trump favors tax cuts and deregulation.

During the June 27th debate, Trump advocated for further tax cuts, lowering the corporate income tax rate from 21% to 15%.

Trump’s supporters primarily come from manufacturing, energy, and construction industries. Particularly, shale oil is a favorite of Trump’s. Currently, oil prices are higher than during Trump’s presidency, and the US has seen $70 billion in shale oil mergers this year. Trump, if successfully elected, will likely make significant changes to the Democratic commitments made regarding climate change, reducing restrictions on shale oil.

Trump leaned to bring manufacturing back to the US, which could mean more trade battles.

Holding stocks that are highly correlated with international trades should be cautious.