$ 50 trillion protection measures against Trump

$ 50 trillion protection measures against Trump

Donald Trump returns to the White House, but without many of the guidelines that were valid during his first term. Numerous Republicans who had previously distanced themselves from Trump have either converted or were voted off. His former economic advisor Gary Cohn and other voices that have spoken out against tariffs should not be welcome in the new Trump administration. The special investigator Jack Smith . In addition, the Supreme Court President BEICHEICHTIMITION BEFORE Criminal prosecution granted.

The role of the stock market

Nevertheless, there is another force that Trump could hold from its most extreme impulses: the $ 50 trillion stock market. During his first term, Trump was obsessed with the movements of the market and viewed the Dow Jones Industrial Average as a real-time barometer for his success. He regularly tweeted the smallest market milestones, which is a drastic contrast to the reserved approach of his predecessors and successors.

market reactions on Trump's politics

Lately Trump has been "euphoric" about the initial increase in the market after its overwhelming victory this month, reported sources to CNN. A market collapse, triggered by a political idea of Trump - such as inappropriate high tariffs in China or an aggressive intervention in the Federal Reserve - could at least hesitate to give the president, if not forcing his plans.

"I do not see that the congress or the courts restrict the authority of the president. Ultimately, only the stock market has real influence on the president's thinking about his agenda," said Isaac Boltansky, director of political analyzes at BTIG.

the past as teaching

investors could react very negatively if Trump was to try to stop Fed chairman Jerome Powell, with whom he had a complicated and sometimes conflict-rich relationship. During Trump's trade war with China, the market fell several times, including the fears of its trading policy. For example, in December 2018 because of the concerns regarding the concerns between the USA and China, what trump brought to be hungry for a deal with President Xi Jinping.

economists have warned that Trump's tariffs on China and suggestions for general tariffs from 10 % to 20 % on all US imports could promote Inflation. "Donald Trump is interested in independent validation bodies. The largest independent validator for his success is the market. It is a daily voting mechanism," explained Ed Mills, Washington analyst at Raymond James. "He could act as a potential bond against aggressive politics."

The reaction of the bond market

While the stock market initially celebrated the election results, the bond market did not do this. The government bonds lost value, which led to an increase in returns, partly due to concerns that Trump's politics could raise public debt and boost inflation. This could slow down the economic recovery of the USA, in particular due to increasing costs for loans - both for mortgages and business loans.

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The higher bonds can also press the equity prices by presenting a competition to normally as boring bonds and making shares appear more expensive in comparison. This development has already led to a withdrawal from the record heights of the stock markets. "The sudden increase in returns in 10-year government bonds (and the associated inflation and deficit worries) are some of the main reasons that are concerned with the stock investors," wrote Lori Calvasina, head of the US stock strategy at RBC Capital Markets, in a message to customers on Monday.

Trump has requested massive new tax reliefs and requested a full extension of the 2017 tax law. But the bond market could have other plans. If there is a rebellion of the rental stoves against the increasing budget deficits, this could ultimately endanger Trump's efforts in the congress. "This will soon take place in the bond market," warns Boltansky. "The market observers will tell us whether they are ready to buy the papers we emit."

A similar situation could occur if investors and business leaders begin to protest against Trump's plans to deport millions of undocumented workers - a step that could also heat inflation . However, it remains unclear how drastically the market reaction would have to be before Trump would adapt. "What we don't know is how much pain he is willing to accept," said Boltansky. Maybe we will soon be an answer in the house.