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Has President Trump's position stabilized? Capvision: Trump 2.0 will lead to the bursting of the US stock foam

王俊杰2017
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On Saturday Eastern Time, after the shocking Trump shooting in the United States that shocked the world, Trump not only survived the disaster, but also benefited from it: after the shooting, Trump's chances of winning the election increased significantly, and it can even be said that the victory has been largely locked in.
However, Kaitou Macro warned that if Trump really wins the 2024 election, the American stock market, which has risen strongly due to the AI boom in recent two years, may collapse, and the foam of American stock market may burst early.
Has President Trump's position stabilized?
According to the odds from the gambling platform Polymarket, Trump's chances of winning in this election have increased from 60% before the shooting to 70%, while his main competitor, Biden, has a winning rate of only 18%.
In fact, before the shooting, Trump's poll approval rating was already ahead of Biden, and after the shooting, most analysts expect Trump's lead to further expand.
Trump's approval rating is already leading in polls (as of July 11th) Data source: FIVETHIRTYEIGHT
If we look back at history, we can find that in the months following the assassination of Republican President Ronald Reagan in 1981, his poll approval rating increased by 8 percentage points.
Trump's election victory will impact the US stock market
However, John Higgins, Chief Market Economist at Capital Economics, wrote in a report that Trump's victory in the election is not good news for the US stock market, as his proposed tariffs and immigration policies will bring disaster to the US economy.
He pointed out that after Trump's victory, the US government may "impose widespread tariffs and reduce immigration... and this trend will lead to a slowdown in US economic growth and an increase in inflation rates
This will put the Federal Reserve in a dilemma: on the one hand, Trump's trade and immigration policies will lead to a slowdown in the US economy, putting greater pressure on the Fed to cut interest rates; On the other hand, rising inflation will also compress the potential space for the Federal Reserve to cut interest rates.
More importantly, if Trump wins a second presidential term, with the Republican Party controlling Congress, the US government's fiscal spending is likely to surge, which will also limit the Federal Reserve's ability to cut interest rates.
The state of the US public finances is more dangerous than in 2016... Large scale fiscal expansion will also give the Federal Reserve more reasons to reassess the appropriate stance of monetary policy, as it may pose a threat to price stability
In this context, the US stock market will also be impacted. Because in the context of the Federal Reserve's expectation that interest rates cannot decrease or may even increase, US bond yields will also rise accordingly.
US Stock foam May Burst Earlier
According to the original prediction of Kaitou Macro, by the end of 2025, the US stock market will have a trend similar to that of the Internet foam in 2000: the S&P 500 index may hit a record high of 7000 points before the foam bursts.
But if Trump wins the 2024 general election, the situation may be different: Higgins believes that the Trump government may burst the stock market foam early, leading to an earlier collapse of the US stock market.
Higgins also mentioned that even if Trump did not win the 2024 election, the US stock market foam would still face the potential risk of slowing corporate profits. In addition, if the Federal Reserve relaxes monetary policy too late, it may ultimately affect economic growth and drag down the trend of the US stock market.
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