Market Shift: Trump’s Economic Promises Face Reality Check
The euphoria surrounding Donald Trump’s election victory has worn off, and the stock market is feeling the pinch. The S&P 500’s return since Election Day has plummeted to a mere 0.5%, a far cry from the record highs reached in the aftermath of Trump’s win. If this trend continues until Inauguration Day, it will mark the worst performance for the broad index between an election and inauguration since 2009.
From Boom to Bust
Initially, investors were thrilled about the prospect of tax cuts and deregulation, which they believed would benefit corporations. The Dow Jones Industrial Average surged over 1,500 points in a single session following Election Day. However, as focus shifted to inflation and interest rates, the rally lost steam. Excluding the one-day gain, the S&P 500 is actually down over 1%.
Inflation Concerns and Treasury Yields
The latest jobs report from the Bureau of Labor Statistics, which showed 256,000 jobs added in December, has raised concerns about sticky inflation. Treasury yields have also spiked, making Trump’s path to implementing his economic agenda more complicated. Policymakers are now questioning whether his plans for tariffs or tax cuts are feasible, and if they will contribute to inflation.
A Pro-Growth Agenda with a Catch
According to Adam Turnquist, chief technical strategist at LPL Financial, Trump’s incoming administration is expected to bring a pro-growth agenda, less regulatory oversight, and potentially lower taxes. However, some of these policies could have detrimental effects on inflation and the U.S. deficit.
A Reality Check for Trump’s Economic Promises
As the Trump administration prepares to take office, the market is taking a step back to reassess the feasibility of his economic promises. With inflation concerns and Treasury yields on the rise, it remains to be seen whether Trump’s plans will be able to deliver the growth and prosperity he has promised. One thing is certain – the market is watching closely, and the Trump bump may soon become the Trump slump.
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