The report that stock strategists are writing today, November 7, in response to the results of the US presidential election, could not be better titled “What will happen to your stock prices under President Trump?” write reports with similar titles. If you are not in a hurry, it is a good idea to read all these reports. You can be sure that you will not find any useful information about investing. Then why did I say “read all those reports”? Some people may get angry. That’s why I added the note, “For those who are not in a hurry.” It will just be a long way to kill time and listen to the complaints of the oil seller.
So, on to the main topic. What will happen to stock prices under President Trump? But the answer is…
The answer is! ?
The answer is! ! ! ?
“What will happen to stock prices under President Trump?” The answer is “I don’t know.”
Yesterday, on November 6, in the Tokyo market, the Nikkei average rose by 1005 yen. In the New York market, the Dow Jones Industrial Average rose 1,508 points. A classic Trump trade happened. But that’s the reaction of “Pavlov’s dog”. They were told that if Trump won the dollar and stocks would go up, so they just reacted accordingly. It is a conditioned reflex. Why would Trump cause the dollar and stocks to rise? It seems logical, but it’s not.
One rationale is that Trump will improve the US economy through tax cuts and deregulation, leading to a stronger dollar and higher stock prices, but that’s a short-sighted idea.
Needless to say, we must also consider the balance with other policies. What about customs duties? Of course, this will put downward pressure on the world economy. For the United States, it will be a source of inflation. If that happens, what will happen to the Fed’s interest rate cuts? In some cases, it may worsen. What about energy policy? What about an EV? What about immigration policy? The various measures and their impact on the US economy are too complex to predict.
First, the policies are contradictory. Dan Ivascyn, global chief investment officer at major US asset management company Pimco, responded as follows in an interview with the Nikkei Shimbun. “(Trump’s) policies are contradicting each other, and although we have spent a lot of time discussing them internally, we do not have a clear position regarding the direction of the exchange rate.”
In other words, it’s like this. Even at a major global asset management company like Pimco, we’ve had internal discussions and the conclusion is that we don’t know.
This is because the policies are contradictory.
Being contradictory means that it is not consistent, and if we think about it in theory, it is normal to think that these policies (which are not all) will not be implemented.
As with tariffs last time, there are exemptions and exceptions, and we won’t know how much of an impact they will have until they are implemented.
In that case,
Now that Trump (and the Congress is also a Republican), such policies have been implemented, and as a result this sector will benefit, and this sector will be disadvantaged…
It turns out that I can’t draw pictures easily. In other words, there is no way of knowing whether the policies announced at the time of the election will be implemented as they are.
Trump proposed during the election that he would end inflation. Can we do anything to stimulate inflation? I wouldn’t do that, normally. However, Trump is not normal. So I might do it. We have to think from this level.
In other words, everything is yet to come. You can not buy ahead of time. We have no choice but to answer one by one. This is the beginning of four years.
Interview Between Time.news Editor and Dan Ivascyn, Global Chief Investment Officer at Pimco
Time.news Editor (TNE): Good morning, Dan! Thank you for joining us today. With the recent outcome of the US presidential election, many are left wondering how stock prices will be affected under President Trump. What’s your initial reaction to this?
Dan Ivascyn (DI): Good morning! It’s great to be here. As always with such transitions, there’s a lot of speculation, but the reality is that the answer to how stock prices will be impacted is quite complex. To put it simply: I don’t know.
TNE: That’s quite candid! There seems to be a prevailing belief that Trump’s policies, specifically tax cuts and deregulation, will propel the economy forward. Do you share this view, or do you think it’s too simplistic?
DI: I think that’s a short-sighted view. While it’s true that tax cuts and deregulation can stimulate short-term growth, we need to consider the broader implications of his policies. For example, the potential introduction of customs duties could create upward pressure on inflation, which complicates matters.
TNE: So, you’re suggesting that the interplay between various policies could pose challenges? Could you elaborate on that?
DI: Absolutely. The policies often contradict each other. On one hand, you have tax cuts that might boost certain sectors, but on the other, tariffs could suppress global demand and create inflationary pressures in the US. Then we have energy policies and the transition to electric vehicles, and those can also have substantial ramifications — both economically and environmentally.
TNE: Interesting. Earlier, you mentioned the reaction of the stock market being akin to “Pavlov’s dog” conditioning. Can you explain that analogy a bit more?
DI: Of course! When people hear that Trump has won the election, they’ve been conditioned to believe that this will lead to rising stock prices and a stronger dollar. So, they respond reflexively, buying stocks, which creates a surge in the market. However, this reaction is based more on instinct than on the underlying fundamentals of the economy, many of which remain uncertain.
TNE: So, you believe that market reactions can be misleading, especially in the context of such a complicated political landscape?
DI: Exactly. Investors need to look beyond the initial reactions and understand the real impacts of multifaceted policies. The economic landscape is shaped by numerous factors, and we must analyze these critically rather than rely solely on conditioned responses.
TNE: That raises an important question: how should investors approach their strategies in this unpredictable environment?
DI: Investors should be cautious. It’s wise to be well-informed about how various policy changes can affect different sectors, and to be prepared for volatility. Diversification and a long-term perspective are key.
TNE: Lastly, Dan, as you look at the broader picture, what do you think will be the fundamental takeaway for investors as we head into this new administration?
DI: The fundamental takeaway is that markets may experience significant shifts influenced by contrasting policies. Investors must remain adaptable and informed, keeping an eye on the global picture rather than reacting solely to national headlines. This isn’t a time for knee-jerk reactions; it’s a time for strategic thinking.
TNE: Thank you for sharing your insights, Dan. It’s always enlightening to hear from experts like you who view the complexities of the economy with a critical eye. We appreciate your time today!
DI: Thank you for having me! It’s been a pleasure to discuss these important issues with you.