The Trump Shooting and the Markets

Surely, the attempted assassination of Donald Trump yesterday in Butler, Pennsylvania will have some ramifications for the markets. I am certain that if Trump didn't turn his head seconds before the shots were fired, he would have been killed, and that would have sent the markets into turmoil. If Trump had been killed, then there would have been riots in the streets and cities on fire. Think of the BLM riots after the death of George Floyd in 2020, and times that by 10. It would have been tantamount to civil war in the US.

A big reason why it would have been terrible for the markets is that Trump had not yet announced his running mate. The country and the world would have had no idea who would take up the mantle as the Republican candidate. In the wake of the JFK assassination in 1963 the stock market immediately declined 2.8%, but only two days later it had recovered from those losses. I believe that a big reason why it recovered so quickly is that the experienced Lyndon Johnson could assume the role of President. With Trump being the presumptive Republican candidate without a viable alternative, the current situation would have been very different. The reason it would be very different and the markets would have gone into free fall is that it would have created massive uncertainty.

But never mind with what may have happened, what did happen is that Trump survived the shooting. US Futures are up slightly, with the S&P 500 expected to rise 0.4%. This may be driven more by positive investor sentiment on the second quarter earnings results though, so I wouldn't read much into the futures. Something that will likely happen now after the shooting, is that Trump will go up in the polls. This happen to Ronald Raegan after he survived a similar assassination attempt in 1981. Odds makers are now giving Trump a 66% chance of winning in November, compared to 59% before the shooting. Markets love certainty, so Trump having an even better chance of winning in November will likely be a positive for markets,

Trump was more pro-market in his term than Biden has been in his. The 2017 Trump Tax Cuts lowered the rate of corporate tax from 35% to 21%. This tax cut is due to expire in late 2025, and while Biden will let it expire and impose additional wealth taxes, Trump will extend it. Biden's promise to effectively increase corporate tax rates will lower all public companies net profit margins. His promise to impose wealth taxes could lead to a mass exodus of stock sales, and possibly to a lot of capital heading to tax havens like the Cayman Islands. This is why I don't think a second Biden term will lead to stocks continuing their upward trajectory. A Trump Presidency on the other hand could lead to higher stock prices in 2025 and beyond, due principally to his favourable tax policies.

What stocks will do well in a future Trump presidency? Gun stocks will definitely do well. Crypto stocks rose immediately in the wake of the shooting. Surprisingly, I don't think defense stocks like Raytheon and Lockheed will do well, due to both Trump and JD Vance being against American involvement in foreign wars. The planned tax cuts will likely raise the national debt, which will fuel inflation. While the planned increases in oil and gas production will have the opposite affect. Technology stocks will continue to do well, and also possibly high-yielders like REITs and oil and gas MLPs. Generally I think that most stocks will do well in a future Trump Presidency.