Shares of Trump Media & Technology rise 5% following first presidential debate – The Economic Times
The U.S. stock market’s reaction remained subdued following Donald Trump’s performance against President Joe Biden in Thursday’s presidential debate. Although some investors are anticipating a Trump victory, historical data suggests that investors should avoid letting political biases influence their portfolio decisions.
Market Reactions to Political Events
The debate led to mixed market reactions. Stock-index futures, the dollar, and other assets rose overnight. However, the S&P 500 index and Nasdaq Composite finished lower on Friday, while the Dow Jones Industrial Average also saw slight declines. This muted reaction came despite a notable rise in futures and the dollar right after the debate.
Trump appeared more composed compared to Biden’s hesitant performance, which led to concerns among Democrats about Biden’s ability to continue his campaign. Despite this, experts advise focusing on broader market factors rather than the political spectacle.
Keith Lerner, chief market strategist at Truist, emphasized that “election season tends to be a very emotional time, and people tend to make emotional decisions. Other factors matter more.” This sentiment reflects the need for investors to keep a level head during political volatility.
Anticipated Economic Impacts
Some analysts believe that a Trump victory could boost market confidence due to potential corporate tax cuts and deregulation. Solita Marcelli, global wealth management chief investment officer for the Americas at UBS, noted that immediate gains for the dollar and stock futures post-debate indicate a growing belief in Trump’s chances.
However, Jeff deGraaf from Renaissance Macro Research highlighted that the correlation between Biden’s poll standings and S&P 500 performance is not statistically significant. This suggests that other economic indicators are more critical in understanding market movements.
Academic research also indicates that political affiliation can heavily influence economic optimism, which can skew investment decisions. Marcelli warns that “partisan bias is a dangerous element for investors, especially in a politically charged election year.”
Key Drivers for the Stock Market
While political events can create short-term market volatility, long-term trends are driven by factors like corporate earnings and economic growth. According to Truist’s Lerner, the stock market’s strong 14% gain in the first half of 2024 is promising for the rest of the year. Historically, when the S&P 500 rises by 10% or more in the first half of the year, it often continues to gain in the second half.
Presidential election years also tend to be positive for stocks, especially from June to October. Despite potential volatility as election day approaches, a clear outcome generally leads to market rallies.
Lerner advises that while political and policy changes are significant, the future path of inflation, interest rates, and the Federal Reserve’s actions will likely have a more substantial impact on the economy and financial markets.
Investors should remain cautious but optimistic, focusing on economic fundamentals rather than the political drama unfolding during the election season.
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