Bob Elliott, a co-founder of ETF provider Unlimited Funds and a former Bridgewater Associates executive, told MarketWatch on Tuesday night that traditional markets believe a victory for former President Donald Trump would be positive for stocks. He said there are two points that go against conventional wisdom.
First, stocks are already seeing strong gains on hopes of a Trump victory, he said in a phone interview. Second, the real question is, when looking at the overall policy mix, including tariffs, does it make sense to focus solely on the potential for corporate tax cuts and their benefits to stocks? This effectively amounts to a middle-class tax cut that causes inflation. A series of positive policies, especially for the stock market. ”
Elliott sees this as almost the opposite of what happened in 2016, when Trump's victory was expected to lead to a decline in the stock market. In fact, stocks initially fell on election night, only to soar after the results were known.
The large budget deficits expected in the event of a Trump victory or a Republican landslide could begin to trigger a move away from the dollar and into other assets such as gold.
“Rising yields and a weaker dollar would be pretty notable signs that markets are pricing in Trump's series of ill-advised policies,” he said.
