Connect with us

Hi, what are you looking for?

Alive Business PlanAlive Business Plan

Stock

The 2016 “Trump trade” repeat is a mistake says BCA

Investing.com — Investors attempting to replicate the “Trump trade” strategy from 2016 in today’s market “are making a mistake,” BCA Research strategists said.

In a note released Thursday, BCA’s team notes that investors expecting similar economic conditions and policy outcomes under Donald Trump’s new term are missing key differences in the macroeconomic landscape.

The primary challenge lies in the contrasting inflation and interest rate environment. In 2016, both rates and inflation were historically low, allowing fiscal stimulus to fuel economic expansion without major inflationary pressures.

Today, however, inflation is significantly higher, and bond yields have risen to levels that complicate the effects of additional fiscal stimulus. BCA emphasizes that even if substantial stimulus measures were implemented, “it will not be welcomed by markets as it was in 2016.”

This time, rising bond yields are likely to prompt a negative response from the equity market, which has recently shown sensitivity to inflation expectations and interest rate increases.

“A negative stock market reaction to higher bond yields and inflation expectations will act as a constraint both on how high Treasury yields can rise and on how aggressively policymakers pursue fiscal stimulus,” strategists led by Ryan Swift noted.

BCA also flags Trump’s planned policies on tariffs and immigration as further risks to economic growth. While new tariffs may boost prices for goods, they would also pressure the already struggling US manufacturing sector unless offset by meaningful demand-side stimulus.

Moreover, immigration restrictions could exacerbate a slowdown in labor supply growth, dampening employment and limiting household spending.

“The prime-age participation rate should flatten-off now that it is above pre-pandemic levels, and tighter immigration policies will cause population growth to fall,” strategists said.

“These factors will lead to slower employment growth, which will weigh on aggregate household income and spending,” they added.

In bond markets, BCA anticipates short-term rises in Treasury yields but sees longer-term declines as economic factors restrain yield increases.

Federal Reserve Chairman on Thursday said the central bank remains on an easing path, though the pace and the ultimate endpoint of that easing will be data-dependent.

BCA strategists continue to expect more easing than the market over the coming 6 to 12 months but added that another 25 basis point cut in December is not guaranteed.

This post appeared first on investing.com
Become a VIP member by signing up for our newsletter. Enjoy exclusive content, early access to sales, and special offers just for you! As a VIP, you'll receive personalized updates, loyalty rewards, and invitations to private events. Elevate your experience and join our exclusive community today!

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    You May Also Like

    Latest News

    The Gateway Pundit, a far-right website, published a note from its editor on Saturday acknowledging that two election workers in Georgia did not engage...

    Latest News

    New majorities in Congress, particularly when the incoming party has a new leader, offer the rare chance for the institution to take a breath...

    Latest News

    Sister Stephanie Schmidt had a hunch about what her fellow nuns would discuss over dinner at their Erie, Pennsylvania, monastery on Wednesday night. The...

    Investing

    JAKARTA (Reuters) -Indonesia has asked Alphabet (NASDAQ:GOOGL)’s Google and Apple (NASDAQ:AAPL) to block Chinese fast fashion e-commerce firm Temu in their application stores in...



    Disclaimer: alivebusinessplan.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.


    Copyright © 2024 alivebusinessplan.com