Former President Donald Trump’s historic conviction for document falsification could lead to increased market volatility, experts have warned.
But that’s not necessarily bad news for investors.
It’s a buying opportunity for investors, Ed Yardeni of Yardeni Research and Yahoo Finance Catalyst said.
“Market selling related to geopolitical or domestic political crises can actually be a buying opportunity,” Yardeni said. “The market will continue to focus on what matters most, and that is the economy. If politics affects that, obviously it will affect the stock market.”
Comments to members of the media after a jury found him guilty of a felony charge of falsifying business records in a plot to illegally influence the 2016 election in Manhattan Criminal Court on Thursday, May 30, 2024 in New York. Former President Donald Trump walks for the cause. . (AP Photo/Seth Wenig, Pool) (ASSOCIATED PRESS)
Investors may be thinking that President Trump’s ruling doesn’t matter after Friday’s soft market reaction. However, that peace may not last long.
Kim Wallace, senior managing director at 22V Research, said the VIX index, known as the fear gauge index, is likely to be “stronger by mid-summer” as the market begins to show signs as the election begins to come into full focus. “It will be sold at that price,” he said. How to react to different election results.
Goldman Sachs strategists Dominic Wilson and Vicki Chan wrote in a recent note that during the past two elections, the summer convention season has been “one of the first broad market-moving events of the election cycle. “It became one,” he wrote.
The Republican National Convention is scheduled to open in Milwaukee on July 15th, followed by the Democratic National Convention in Chicago on August 19th.
The VIX index has slowed so far this year. The CBOE Volatility Index ended last month below 12 for the first time since 2019 and remains well below its historical average of 19.9.
With about five months until Election Day, investors are starting to assess which candidate will be better for stocks.
According to analysis by Adam Turnquist, chief technical strategist at LPL Financial, the market appears to be rooting for a potential Trump victory this fall. The correlation between the S&P 500 and Mr. Trump’s chances of winning the election has increased significantly in recent months.
Conversely, President Biden’s chances of winning have been negatively correlated with the market since February.
When comparing investor sentiment to past performance, Democratic presidents have historically performed better in the market. Ryan Detrick, chief market strategist at Carson Group, told me earlier this year that the S&P 500 averaged an 11.5% gain when a Democrat was in the White House, compared to 7.1% for a Republican. .
According to industry experts, the main policy areas influencing the market include fiscal policy, taxes and regulation, and geopolitics.
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If campaign promises are any indication, a win for President Biden in November would likely lead to more investment in clean energy and manufacturing, expanded health insurance, and lower prescription drug costs.
Possible market-driving policy shifts under the Trump administration include an extension of the 2017 tax cuts, a promise to “free up domestic energy production,” and 10% tariffs on most imports, including imports from China. This includes plans to impose a 60% tariff on Wall Street and policy experts say Yahoo Finance could spook markets and push up inflation.
“Trump is largely seen as the best candidate in the market because of his deregulation agenda, but there’s really no real sense of what’s going to happen from a trade policy perspective,” said Isaac Boltanski, director of policy research at BTIG. There are concerns,” he said.
Sarah Bianchi of Evercore ISI, who served as acting U.S. trade representative during the Biden administration, said the market has not yet priced in the “Trump 2.0 trade war risk,” but that could change if Biden continues to lead in opinion polls. Warn if there is.
“We believe Trump 2.0 means a return to trade-related market volatility, and I would not be surprised if markets begin to price in some of that risk soon,” Bianchi said in a note.
No matter who wins the election, Berkshire Hathaway billionaire Warren Buffett will likely still focus on ultra-long-term investing, and so will his son. Listen below to hear Howard G. Buffett talk about his investment philosophy and his legendary father on Yahoo Finance’s podcast “Opening Bid.”
Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Have a tip about a deal, merger, activist situation, or more? Email seanasmith@yahooinc.com.
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