As the U.S. election approaches, every word and deed of the Republican presidential candidate, Donald Trump, is once again drawing the market's attention.
Although Trump has long regarded the U.S. stock market as a barometer of his governance performance, and indeed, the U.S. stock market did reach historical highs during his tenure, it cannot be ignored that if we carefully review history, we will find that Trump's direct impact on the U.S. stock market in the past has mostly been negative...
What worries Wall Street is that if Trump wins the U.S. election again this year, the Trump storm in the U.S. stock market may come back again.
The Trump storm Cannot Be Ignored
Although Trump himself may be very happy to see the U.S. stock market rise, some of his past remarks have often exacerbated market chaos and even caused a wave of selling - especially in companies or industries related to his political goals.
Take a recent example: In the middle of this month, Trump said that Taiwan should pay the United States protection fees and that his team members asked Taiwan to increase military expenses. As soon as this was said, TSMC's stock price fell by about 15%.
In the same interview, Trump also targeted U.S. large technology companies, intensifying the selling of U.S. technology stocks, and the NASDAQ 100 index fell nearly 10% a few days later, wiping out more than 170 billion U.S. dollars in wealth.
In addition, Trump's attacks on green/renewable/clean energy companies also triggered the selling of these specific industry stocks, and market commentators jokingly said that was the Trump storm hitting wind and solar energy stocks.
Looking back at Trump's last term, similar cases are also everywhere. For example, he would suddenly make some casual remarks on social media, or suddenly make unexpected policy positions that surprised the market, causing the stock prices of those unfortunate victim stocks to plummet.
In addition, in June 2018, Trump suddenly tweeted a threat to levy taxes on Harley-Davidson to punish the motorcycle manufacturer for shifting production overseas. As soon as this was said, the company's stock price fell by nearly 10% in two days.
Another time, Trump suddenly posted on Twitter, accusing Delta Airlines of not performing well in dealing with Trump's travel ban and of being responsible for the long delays at the airport caused by it, which led to the company's stock price falling nearly 10% in the following two days.
The Entire Market Could Be Affected
Sometimes, the target of the Trump storm is not just a company or industry, but the entire market.
For example, after Trump suddenly tweeted in 2019 that he would impose tariffs on imported goods from China, the S&P 500 index fell by 4% on that day and the next day. On another occasion, Trump inexplicably suddenly verbally attacked Federal Reserve Chairman Powell, and the U.S. stock market lost 500 billion U.S. dollars in market value the next day.
A study even found that when the keywords tariffs, Powell, or Fed appeared in Trump's tweets, the stock market would often fall. Obviously, the market did not welcome Trump's protectionist stance or attempts to undermine the independence of the Federal Reserve.
Another statistical study by Bank of America Merrill Lynch pointed out that during Trump's first term, the days when Trump posted a large number of tweets (more than 35 tweets in a single day) showed a clear correlation with the negative returns of the U.S. stock market.
Trump's policy stance is unpredictable, and his language style is too capricious, which is obviously not favored by Wall Street. After all, the market usually dislikes unpredictability, and Trump himself is almost the spokesperson for the word unpredictable.
In contrast, the U.S. stocks that can really benefit from Trump's governance prospects are only a few niche sectors: private prisons and gun manufacturers, etc. During Biden's tenure, these industries were strictly regulated, while Trump tended to relax regulations on these industries.
Mega Cap Companies May Be The Next Victims
Looking to the future, judging from Trump's current policy commitments, his second term may be more dangerous for the stock market than his last term. And the U.S. stock giants that have been riding the wind and water in the past two years may be the top target of this Trump storm.
Firstly, he has promised to impose a 10% tariff on all imported goods and chose JD Vance as his running mate - Vance has always been known for being born at the bottom of the United States, supporting anti-monopoly and anti-corporate rhetoric.
At a recent rally, Trump also began to attack the U.S. stock market, which has recently set a record, saying that it only makes the rich richer, which also reflects a tough economic populism. In other words, although Trump chose a business-friendly deregulation stance during his first term, he may not choose this stance in his second term.
Most importantly, Trump's relationship with many CEOs of large U.S. companies may have been seriously damaged. A report said none of the CEOs of the Fortune 100 had publicly donated to his campaign, and that makes Trump very furious.