Trump victory trades to swell after shooting, investors say

Investors said on Sunday that Saturday's shooting at an election rally for former U.S. President Donald Trump increased his chances of regaining the White House, with trading betting on his victory set to increase next week.

Trump was shot in the ear at a rally in Pennsylvania on Saturday in what authorities viewed as an assassination attempt. Trump's face was spattered with blood and he pumped his fist shortly after the attack, and his campaign said he was doing fine following the incident.

Fixed asset portfolio manager Rong Ren Goh said that before the shooting, the market reacted to the prospect of a Trump presidency, pushing the dollar higher and preparing for a steeper U.S. Treasury yield curve, and these trades may be in place. Strengthening in the week ahead.

It's the first time a U.S. president or a major party candidate has been shot since Republican President Ronald Reagan was assassinated in 1981, potentially upending the Nov. 5 battle between Republican President Donald Trump and Democratic President Joe Biden. In the rematch, the race has been close in the polls.

Nick Ferres, chief investment officer of Vantage Point Asset Management, said: “As far as I remember, Reagan's polling ratings were up 22 points after the assassination attempt. This election is likely to be a landslide victory, which may Uncertainty will be reduced.

World leaders and U.S. politicians condemned the shooting, while some industry executives, including Tesla CEO Musk, announced support for Trump.

Since his poor performance against Trump in the presidential debate two weeks ago, Biden has faced growing doubts from donors, supporters and fellow Democrats about his ability to defeat Trump and meet the demands of the job.

Immigration and the economy have been major concerns for U.S. voters, who view Trump as the better candidate on the economy, according to a Reuters/Ipsos poll, even as a Biden White House seeks to gain momentum from slowing inflation and job losses. Benefit from a solid economy with lower rates.

Under Trump, market analysts expect tougher trade policies, fewer regulations and looser climate change regulations.

Investors also expect that corporate and personal tax cuts expiring next year will be extended, adding to concerns about rising budget deficits under Trump.

Trump said in an interview in February that he would not reappoint Fed Chairman Powell, whose second four-year term is set to expire in 2026.

Long-term Treasury yields have risen with the possibility of a second Trump administration.

While the trend in the still-inverted Treasury curve was largely driven by changes in expectations for the Federal Reserve's first rate cut of the cycle, the gap between the 2-year and 30-year bonds has narrowed from negative 30 basis points to negative 6 basis points. A key point during the debate between Den and Trump.

The gap between the more closely watched two-year and 10-year Treasury yields was negative 27 basis points, half the level three weeks ago.

Ferres said: “Trump has been more 'pro-market.' The key question going forward is whether fiscal policy remains irresponsibly loose and the impact that may have on (new) inflation and the future path of interest rates.”

The stock price has been rising. The S&P 500 and the Dow Jones Industrial Average both hit record highs on Friday, with the S&P 500 up 18% this year.

“In each of the five presidential elections over the past 20 years, CEO confidence, consumer sentiment, and especially small business optimism have responded more favorably to Republican victories than to Democratic victories,” Goldman Sachs analysts wrote.

“To the extent that improved sentiment leads to an increase in spending and investment, a Trump victory could boost some companies' earnings prospects even without significant policy changes.”

Shortly after the shooting, billionaire hedge fund manager Bill Ackman endorsed Trump. Musk also backed Trump, calling him “tough” on social media platform X.