The retreat of the Japanese yen will stabilize the US stock market and return it to its fundamentals.
AInvestSunday, Jul 21, 2024 8:20 pm ET
1min read
UBS --

With President Trump stepping down and Vice President Kamala Harris taking over, the U.S. stock market may be starting to stabilize.

Speculation about Mr. Trump’s exit has weighed on the market in recent trading days, sending the S&P 500 down to its biggest weekly loss since late 2016. Now, with the risk event behind it, the outlook may return to the fundamentals, with some of the “Big Seven” companies reporting earnings on Tuesday.

The market initially fell on the news, but has recovered most of its losses, to about 0.7 per cent.

From a sector perspective, with investors starting to consider the possibility of Ms. Harris defeating Mr. Trump, political risk will remain. In particular, trade will remain a big issue until the election, and if rhetoric escalates, technology and semiconductor companies will be at risk.

Some investors may have already sold off the Dow, strategists at UBS said, as they bet on Mr. Trump winning the election. Industry research points to him further cutting corporate taxes, which is a negative for the market as the parts of the 2017 tax overhaul that are set to expire are already eroding corporate profits. But his policies are also seen as stimulating inflation, so the tug of war between taxes, trade and inflation will affect the market’s direction until the end of the year.

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