Billionaire investor says a ‘Trump rally’ is powering markets to record highs

Earlier this week, former President Donald Trump tried to take credit for booming stock markets.

And maybe he’s right.

Billionaire investor Scott Bessent, former head of Soros Fund Management, says rising markets are being fueled by polls showing former President Joe Biden can be defeated in the November election.

“We believe the stock markets are in the midst of a ‘Trump Rally’ that will last as long as he remains ahead of Biden in the polls,” he wrote to investors in his Key Square Capital Management fund on Wednesday.

Trump is the clear frontrunner to claim the Republican nomination.

And a series of national polls suggest he is leading Biden in their head-to-head matchups.

On Monday, former President Donald Trump took credit for record stock markets

That coincided with the S&P 500 hitting an all-time high in the middle of last month.

Bessent concludes that this was driven by traders with one eye on a future Trump administration that would renew its tax cuts, along with other market-friendly policies.

And he illustrated his analysis with a chart from Renaissance Macro, which showed that cumulative returns when Trump was ahead in the polls were much greater than returns when Biden was leading.

“We believe that a major boost to the recent stock market rally is the dominant lead he has over President Biden in early polls, both on a national basis and in key battleground states,” he wrote.

“Liquid asset markets are priced based on future opportunities – earnings forecasts, yield curves, commodity futures prices to name a few – and in our view the markets are now anchoring in the potential market-friendly policies of a Trump victory on November 5, 2024. .’

In particular, he said the market was focused on whether Trump’s spending cuts, which expire in 2025, would be extended. That would be much more likely under a second Trump administration.

And he rejected predictions that a second term would bring chaos.

“We believe that the forecasters are way off on how another government would function,” he wrote. “Our analysis leads us to believe it would be much more like the 2017-2018 period of Trump’s first presidency than the more tumultuous 2019-20 period — more like Calvin Coolidge than Herbert Hoover.”

He predicted the former president would preside over an economic boom similar to the Roaring Twenties of a century ago, built on deregulation, energy independence and a revival of domestic manufacturing.

Scott Bessent, founder and CEO of Key Square Group, said in a briefing note to investors on Wednesday: “We believe the stock markets are in the midst of a ‘Trump Rally’ that will last as long as he remains ahead of Biden in the market. the polls’

The Daily Mail’s most recent national poll, conducted in December, showed Trump with a four-point lead over Joe Biden. The results have a margin of error of 3.1 points

JL Partners also surveyed voters in key swing states Arizona, Georgia and Wisconsin. The results showed that Joe Biden was in danger of losing two states that helped him win in 2020

Trump posted Monday that he was responsible for the stock market highs

“In conclusion, we believe that as long as Trump remains ahead in the polls or the race is close, the Trump Rally can continue until the election,” he wrote.

The Dow Jones industrial average crossed the 38,000 mark on January 22, a few days after the S&P 500 hit its own all-time high.

Trump celebrated the milestones with an all-caps message on Truth Social.

“THIS IS THE TRUMP STOCK MARKET,” he wrote.

“Because my polling against Biden is so good that investors are predicting that I will win, and that will drive the market higher.”

He also said an election victory for Biden would be bad for markets.

“I think there will be a crash if I don’t win,” he said during a town hall event on Fox News last month.