Is Market Factoring In A Trump Win? Strategist Singles Out A Factor That's Driving The Record Run

The stock market has been on a record run, and with the presidential election just under five months away, analysts and experts have begun reading the tea leaves regarding its implication for the election outcome.

What Happened: The recent change in the presidential polling trend is under the radar for potentially driving the market’s run, said CNBC host Brian Sullivan in the Last Call show on Monday. He also pointed out the positive correlation between the S&P 500’s performance over the past three months and odds predicting a [Donald] Trump victory over the same time frame.

“Both charts look awfully similar as more and more people said that Trump is likely to return to the White House,” he said.

Jefferies chief market strategist David Zervos, who joined Sullivan on the show said the outcome of the Nov. 5 election would hinge on the differences in policies under a potential Trump or [Joe] Biden presidency, namely monetary, fiscal, trade, regulatory, and even immigration. There are going to be subtle differences between the two in many of them. But the big differences are going to be in the regulatory policy, he said, adding that this could explain the chart.

“Wall Street will applaud deregulation. It's that simple and I think if you look at it, all of the storylines behind the Trump analyst or the Trump folks that are talking behind the scenes you know they are talking deregulation whether it's a NATO or heritage or the FBI,” the strategist said.

“We know there's a lot of executive orders ready to go Day-one if he were to win… they cut out red tape and they make it a lot easier for small businesses to compete and for I think a more of a positive supply shock which at the end will be I think applauded by by the S&P.”

This is being priced by the market, Zervos said.

"The big differences are on regulatory policy," says @jefmacrostrat on suggestions that Wall Street is pricing in a Trump victory. "Wall street will applaud deregulation. It's that simple." pic.twitter.com/id4XtEWNJ8

— Last Call (@LastCallCNBC) June 17, 2024

See Also: Best Inflation Stocks

Why It’s Important: The stock market has been on a tear this year following a stellar 2023, when it rebounded from 2022’s disappointing performance.

The market rally has been attributed to some of the headwinds that are turning into tailwinds. Inflationary pressure that reared its ugly head in the aftermath of the COVID-19-induced stimulus measures peaked in June 2022 and has been receding since then. Easing inflationary pressure is widely expected to prompt the Federal Reserve to rewind its aggressive rate hikes. Currently, the Fed funds rate is at a 22-year high of 5.25%-5.50%.

Over and above all these, artificial intelligence technology’s rise to prominence has provided a shot in the arm to the market. This is evident from the strong run-up in high-profile AI stocks such as Nvidia Corp. NVDA. The bull run is facilitated mostly by these stocks and a broader participation hasn’t materialized so far.

Meanwhile, negative perception regarding the economy under Biden has weighed down on Biden’s poll prospects. Pro-Biden experts see this mostly as perception rather than reality.

The SPDR S&P 500 ETF Trust SPY, an exchange-traded fund that tracks the S&P 500 Index, edged up 0.80% to $547.10, according to Benzinga Pro data.

Read Next: Inflation Cools In May, Fed Hints At Slower Pace Of Rate Cuts, Stocks Hit New Record Highs: This Week In The Market

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