In This Article:
By Lewis Krauskopf and Suzanne McGee
NEW YORK (Reuters) - Donald Trump's inauguration on Monday could herald a more volatile period for markets, with the Republican seen moving quickly on a wide swath of issues including trade and immigration that are expected to swing asset prices.
Trump's tariff plans could further fan inflation fears that pressures bond and stock prices, while efforts to tighten immigration controls could also reverberate through those markets. Moves to ease regulation are poised to lift assets, including crypto and bank stocks.
"The markets will be very sensitive to this speech," said Jeff Muhlenkamp, a portfolio manager at investment management firm Muhlenkamp & Co. "Everyone right now is trying to parse every word and nuance that comes from Trump or his biggest allies.”
Some prices already incorporate Trump's expected policy aims, among them tax cuts, reduced regulations and tariffs on foreign imports. The address could also lay the groundwork for White House actions in the coming days and weeks.
“Financial markets are primed to move on any indication that the new administration might pursue a different course than it has telegraphed up until now,” said Doug Peta, chief U.S. strategist at BCA Research.
In general, stocks have had a tepid reaction to presidential inauguration, although this time could be different given Trump's potential to be unpredictable and ability to shake markets with his commentary, investors said.
With inaugurations since World War II, the S&P 500 has posted an average decline of 0.27%, with the index rising or falling on about half the occasions on the day of the speeches themselves or on the first day of trading following instances markets were closed, according to LSEG data.
Following Trump's last inaugural address, in January 2017, the S&P 500 ended up 0.3% on the day. The U.S. stock and bond markets are closed on Monday, which is also the Martin Luther King holiday, so much of the trading reaction may not be evident until Tuesday.
During the entirety of Trump's first term, the S&P 500 rose nearly 68%, but markets saw bouts of volatility, stemming in part from a trade war Trump fought with China.
STEAM BEHIND TRUMP TRADE?
Of course, investors for months have been shifting portfolios based on the impending change in the White House, with many so-called "Trump trades" gaining steam even ahead of the November election when he was leading in polls and betting markets.
For example, shares of Tesla, which is led by Trump backer Elon Musk, have soared 60% since the Nov 5 election. Other gainers include bitcoin, which has jumped over 30% since Trump's win amid optimism for a friendlier regulatory environment, and private prison stocks Geo Group and CoreCivic, which have climbed about 100% and 60%, respectively, as investors anticipate an immigration crackdown could increase need for detention centers.