Is the Trump Trade Making a Comeback?
As election season heats up, a rally in certain stocks, cryptocurrencies, and Donald Trump’s social media enterprise signals that some investors are increasingly betting on the former president’s potential victory in November. This sentiment appears to align with shifts observed in prediction markets.
Market analysts are noticing a resurgence of the so-called “Trump trade,” a concept suggesting that specific sectors and financial assets—such as oil companies and cryptocurrencies—would thrive under Trump’s leadership, characterized by lower taxes and reduced regulatory oversight.
Here are key indicators that the Trump trade is gaining traction:
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Stanley Druckenmiller, a billionaire investor, recently remarked to Bloomberg that, over the past two weeks, market behavior has indicated a strong conviction that Trump is likely to win the election. It is noteworthy that Druckenmiller himself has stated he does not intend to vote for either candidate.
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One compelling piece of evidence Druckenmiller highlighted was a significant rally in bank stocks, which have surged by 8.5 percent in just the last fortnight. However, it is essential to mention that this increase coincides with banks reporting better-than-expected earnings, adding complexity to the narrative.
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Additionally, shares of Trump Media & Technology Group, the former president’s unprofitable social media venture, have skyrocketed since late September, enhancing its market value by nearly $2 billion. Nevertheless, the stock’s erratic trading patterns do not consistently align with polling data or prediction markets, raising questions about whether the company would attract more advertisers should Trump reclaim the presidency. Some advertisers may rush to the platform to gain political favor, while others might opt to steer clear.
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In the cryptocurrency realm, Bitcoin has experienced a notable increase of about 13 percent over the past week. Many in the crypto community anticipate that a second Trump administration would be more favorable toward digital assets, despite Vice President Kamala Harris advocating for more stringent regulations in the industry.
Furthermore, the U.S. dollar is nearing a two-and-a-half-month high this morning, as currency traders seem to be anticipating a Trump victory. Many are betting that his economic policies could lead to rising inflation, a decrease in bond prices, and a strengthening of the dollar—though it’s worth noting that Trump has historically favored a weaker currency.
However, investors should be cautious when wagering on Trump. Holger Schmieding, chief economist at Berenberg Bank, commented on the phenomenon, stating, “While the Trump trade is observable in financial markets, I don’t support it in the long term. Policies like higher tariffs and reduced immigration could ultimately undermine the vitality of the U.S. economy.”