Wall Street is optimistic that Donald Trump may return to the White House.
Investment is rising in banking, cryptocurrencies, and energy as traders anticipate deregulation and protectionist measures.
Shares of Trump’s company, Trump Media & Technology, have nearly tripled recently, despite low revenue and substantial losses.
Investors expect inflation to rise, resulting in increased treasury yields and a stronger dollar as they buy longer-term government bonds.
The “Trump trade” is back, driven by promises to cut red tape and taxes, which may boost profits in sectors like tech, crypto, and finance. Bank stocks have surged by 8.5% in two weeks, while Bitcoin is up 13%.
However, economists warn that Trump’s policies could reignite inflation, complicating the economic recovery from the pandemic’s price shocks.
Trump’s economic agenda includes heavy tariffs to protect American jobs. He promises a 60% tariff on Chinese goods, which could lead to higher prices for consumers.
Economist Joseph Foundy argues that Trump’s tariffs could significantly increase inflation by raising import costs, which would be passed on to consumers.
Mortgage Rate Concerns
As investors adjust to the possibility of a Trump victory, mortgage rates have risen, even as the Federal Reserve has cut interest rates. The average 30-year mortgage rate is now 6.44%, up from 6.32% last week.
Tariffs, Taxes & Immigration
Economists believe Trump’s policies could exacerbate inflation. If Trump cuts taxes and imposes tariffs without reducing spending, it could lead to prolonged high-interest rates and slow growth.
The Peterson Institute warns that Trump’s tariffs could push inflation back to 9.3% by 2026.
Trump’s strict immigration policies could also worsen inflation by creating labor shortages, driving up wages in critical sectors.
Additionally, Trump’s criticism of the Federal Reserve may impact its independence, making it harder to manage inflation effectively.
Voter Sentiment vs. Economic Reality
Voters are wary of a return to high inflation but still resonate with Trump’s economic message. He highlights rising costs and inflation under Biden, particularly food prices which have increased nearly 25% since before the pandemic.
While inflation has declined from its peak in 2022, essential prices remain high. The Consumer Price Index rose by just 0.2% in September, highlighting persistent affordability issues.
Economists argue that Trump’s inflationary policies could increase public debt, but in a polarized political environment, voters often overlook these risks.
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