Trump’s 2024 presidential bid a fresh wrinkle for markets

NEW YORK, Nov 16 (Reuters) – Former President Donald Trump’s entry into the 2024 presidential race on Tuesday confirmed the world’s “worst kept secret” and created another variable for markets that some investors say remains a low priority for now.

Trump, who has been relentlessly attacking the integrity of the US vote since his defeat in the 2020 election, announced his candidacy at his Mar-a-Lago estate in Florida, apparently with the intention of outflanking potential Republican rivals.

His spirited televised announcement comes after last week’s disappointing congressional midterm elections, which many Republicans blame on him, and as the party closes in on a majority in the 435-member House of Representatives.

“I don’t think the announcement means as much as people thought it would – and with the weaker results at the midterms, it makes the nomination less likely,” said Joshua Crabb, head of Asia-Pacific equities at investment manager Robeco.

“It will only have an effect if he gets a good grip with the nomination.”

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Politics has largely taken a backseat to Wall Street this year, with macroeconomic concerns and Federal Reserve policy key drivers for markets.

Trump’s announcement, meanwhile, did not come as a surprise to investors, as the former president telegraphed the possibility that he might run for some time.

“This has got to be the worst-kept secret on the planet,” said Bill Stone, chief investment officer of Glenview Trust Company. “There are a lot of other things going on that have a higher priority, although that can obviously change overnight.”

Of course, it is difficult to predict what kind of investment landscape the next president of the country will face.

It is probably unlikely to bear much resemblance to the current one, or the backdrop that prevailed during Trump’s 2017-2021 tenure, which was known for relatively low inflation and a much less hawkish Fed.

“He’s the Holy Trinity of market greasing — stimulus with deficit spending, low interest rates — easy earnings — and lack of regulation,” Anthony Scaramucci, former Trump White House communications director and founder of Skybridge Capital, said on the sidelines. conference in Singapore.

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“But the flip side is that (investors) also know it creates what markets absolutely hate: political instability.”

DIVIDED HURT US

Unlike Trump’s previous candidacy, discord within the Republican Party has also worried some investors.

“If anything, his decision to run could further divide Republicans, with many blaming him for their poor performance in the by-elections,” said Shane Oliver, head of investment strategy at AMP in Sydney. “These divisions may even reduce the chance of a more market-friendly Republican administration taking over the presidency in 2024, so some investors will actually see this as a negative for the markets.”

The US stock market rose more than 50% between Trump’s surprise election victory in 2016 and his defeat in November 2020, despite flashpoints of volatility such as the trade war with China and the severe but short-lived economic slowdown that accompanied the COVID-19 pandemic. .

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The Republican president took credit for the rise and often tweeted about Wall Street’s performance.

Despite a recent rally, the S&P 500 (.SPX) fell about 16% for the year on Tuesday after the Federal Reserve made a series of big interest rate hikes in its bid to fight inflation.

Investors are also looking at Trump-related stocks as a gauge of the former president’s prospects.

Shares of Digital World Acquisition Corp ( DWAC.O ), a blank check company seeking to publicize Donald Trump’s social media company, fell 8.8% on Tuesday, while software developer Phunware Inc ( PHUN.O ), which was hired by Trump’s 2020 re-election campaign to build a phone app, down 4.7%.

Both stocks rallied earlier this month on reports that Trump was considering a third run for the White House.

Reporting by David Randall, additional reporting by Vidya Ranganathan and Tom Westbrook; Lincoln Feast montage

Our Standards: The Thomson Reuters Trust Principles.

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