Trump Trade 2.0 in focus post assassination attempt: Special Report

A recent assassination attempt on former President Donald Trump at a Pennsylvania rally has intensified focus on the 2024 presidential race. Markets are now reassessing the potential economic and financial impacts of a Trump or Biden presidency.

Investors, who previously disregarded political rhetoric amid market highs, are now closely monitoring developments leading to the Republican National Convention and ultimately, the November election. Trump's polling lead over President Biden has raised speculation about a potential Republican sweep, a scenario with significant implications for Wall Street.

Yahoo Finance executive editor Brian Sozzi is joined by Stifel chief Washington policy strategist Brian Gardner, C.J. Lawrence partner & portfolio strategist Terry Gardner, and Yahoo Finance Washington correspondent Ben Werschkul to dissect US politics. Together they analyze the intense political landscape, potential trade policies under Trump vs. Biden, and the market implications of each candidate's potential presidency.

Video Transcript

Welcome to opening bid.

I'm Yahoo.

Finance executive editor Brian Sazi.

Now let's make some money and hopefully get a lot smarter here with me.

Now is Steel was Chief Washington policy strategist, Brian Gardner and his brother.

Uh This is kind of fun to be able to do this CJ Lawrence portfolio strategist, Terry Garner junior and Young Finance Washington correspondent Ben Wesel.

Uh Ben me and you are not related.

So we'll just keep it moving and we'll defer where we can to Terry and Brian.

Uh Good to see both of you guys.

Brian.

My natural inclination is always to go to you because of your political background.

But Terry, I want to start with you because we're trying to figure out why stocks aren't reacting the way one would think after an assassination on a former president.

Yeah, so Brian, good morning.

Um you know, it's a sad event obviously in our nation's history.

Uh you know, markets have ways of discounting different um geopolitical events and crises.

And so I think the market is trying to look through as you and I have talked before, you know, the market looks across valleys, right?

So when a crisis hits when an issue hits the market looks for an immediate reaction, but then tries to figure out, you know, where things go after that.

And I think, you know, probably over the weekend, the odds of a President Trump, uh victory in November Rose and, uh, and that's, you know, perceived as being positive for business, positive for markets.

And, um, so we think there's probably a little bit of a bump today in the, in the equity markets.

Brian, is that the right takeaway here?

That investors, I've even had some investors tell me they have already started to price in a second Trump presidency.

But is that the right call based on everything we've heard the past 48 hours?

Yeah.

II, I think it is.

Um you know, our parents are going to be delighted to hear that we're, we're in uni in unison here in agreement.

Uh No, I think it is a risk on trade.

I mean, a lot of times when there's conflict, um chaos, you expect a risk off trade, but for Terry's comments, the markets continue to price in the likelihood of a Trump victory that's gone up and that's a risk on trade, right?

So it is positive for equities, Brian.

Is it go ahead.

Oh, I just had a short term risk question for you guys about the about the convention happening this week.

We're seeing a lot of evidence that Trump wants to be a unifier he gave an interview saying he's going to rewrite his speech, Biden had gave his address to the nation last night.

Curious your guys thoughts on whether A, you believe that or b whether that matters for markets, for markets.

I'm not sure it matters politically.

I think it has the potential and, and maybe it flows through that.

You know, I think you have to discount the 1st 24 48 hours and see how politicians react longer term.

Terry is talking about, you know, looking across valleys, I think the same applies for politics.

So we'll see if the unity message lasts.

But I think Trump has more to gain out of this unity message if he can pull it off.

And I will say that, you know, his campaign has been much more disciplined this time around than 2016 and 2020.

And so if they go ahead with a kind of high road approach, unifying the country, I think that, that, you know, I don't want to talk in vulgar terms, but you know, it is what it is, there's a political benefit for that.

And I think markets kind of pick that up and it reinforces their confidence, investors, confidence of a Trump victory.

Yeah, I think Brian hit it on the head, calm, breeds confidence.

So if we can take the rhetoric down and have a little more of a steady state approach to politics, I think that would be positive for stocks and for bonds.

Terry, why do investors think a second Trump presidency?

Is that good?

Is it the tax cut angle and what he might do there?

I think that might be it, Brian.

I mean, I can't say there's a wide chasm between these two candidates with regard to policy, particularly with regard to trade, but perhaps in areas of energy and Brian can speak to legislative slate that would come before Congress under a Trump presidency.

But I think just the perception is that lower taxes, less regulation is probably positive for corporate profits and therefore positive for the markets.

Brian.

What what policies do you think Trump?

I mean, what do you think he could actually get past uh everybody's focused on potential tax cuts but I can't imagine he can't do what he did in his prior presidency just given where deficits are.

It's, it's the deficit story, Brian, it's also the realignment of the country and the parties and the shifting of the Republican party, the Republican party is becoming a more populist party.

Trump has led the way but a new group of Republicans is going to pick up that Baton, especially in Congress.

So there's a surprising amount of commonality between what Biden and Trump can get done in a second term.

Let's stay with the tax cuts for a second.

I think you'll probably see the tax cuts extended, the individual tax cuts extended for most individuals.

I think in either administration.

I can give you a scenario where the top rate resets higher to what it was before the, uh, the 2017 law on corporate rates, there are a lot of Republicans on Capitol Hill and I think that number is going to grow that they're not bew to lower corporate tax rates, especially if it means that they have to make choices for their constituents.

They're not tied to big business.

They don't want to spend political capital on the US Chamber of Commerce.

And so under a second Trump administration, I would not be surprised to see the corporate tax rate tick up 234 points.

So tax rates, I think investors are getting a little ahead of themselves and focusing on uh on tax rates.

So there's that, um I think there is a uh a, um there's a deregulatory field and animal spirits that come along with it and so that can be beneficial to markets.

But on tax policy, I think the two of them would probably accomplish roughly the same, maybe, you know, different shades of gray, but essentially the same outcome.

I agree with you on the tax question, Terry because it's, I, I've been covering Chip Roy who's been talking about a 25% tax rate after at the end of next year, which, which is pretty remarkable to hear from a, from a conservative Republican.

Is it different on trade um for you guys?

Because that's an area where President Trump could kind of do, do pretty much whatever he wants.

He could, he could push through these policies he's promising and including a 10% tariff on everything.

Is that something you, you believe could happen there?

You want to go first and I'll, I'll, I'll follow up on that.

Yeah.

Sure.

So, I mean, I think, um, I think both candidates are fairly, uh, close in terms of their view of trade and tariffs.

Uh former President Trump being a little more aggressive there, I think it's likely that we would see increased tariffs regardless of who sits in the White House.

And I think what investors need to calibrate is how that impacts inflation, tariffs are ultimately inflation.

Well, does it, do you think, do you think it would impact inflation because the vibe we're getting now is inflation is starting to come down?

It is.

And um and so that's under the current state, right?

So if you start tacking on 4050 60% tariffs, Brian on imported goods that just raises the cost of goods here in the US, raises the cost of raw materials that are used or component parts used here in the manufacturing process and that's all passed on to the consumer.

So, you know, tariffs tend to be inflationary at some level and you know, oo on the tower side.

Yeah.

So you look at it in two different, you know, two buckets.

One is the China bucket and I would take Trump at his word.

He's going to go ahead and impose higher tariffs vis a vis China.

Then he has a proposal on more global tariffs.

That's tougher to do.

And I really think that's more bluster than anything else, but I think we are going to see higher tariffs on China.

And then you get to the US MC A debate.

This is the trade agreement between Mexico US and Canada that replaced NAFTA.

That's up for review in 2026 all three parties have gripes.

And so that 26 is going to be a big year for North American trade.

If I if I could pivot back on trade, right?

One of the things that tariffs increased tariffs may do well, it it could be potentially inflationary is it makes corporate managers, management teams think a lot about where they're based and where their, where their production is based.

And so it feeds into this whole reshoring and on shoring theme which we're very focused on because it's bringing manufacturing closer back to the consumer base.

The US being the largest consumer market in the, in the world and that's where manufacturers want to be to avoid tariffs that they would experience by bringing goods back from overseas guys with a little brief time that we have left.

Brian.

Let me come to you.

Um Should investors start positioning for a Republican sweep?

I know you were looking for what a 40% chance of President Biden stepping down is that Republican sweep more likely.

I, I think it is.

Um, you know, I think the chances of Republicans winning the Senate were always pretty good.

They've already essentially picked up the West Virginia seat that gets into 50.

They have to pick up one more seat someplace else.

And the situation coming out of the debate a couple of weeks ago with President Biden is probably going to tamp down democratic enthusiasm and turnout and that could hurt some Senate candidates.

So Democratic Senate candidates, so it increases the chances of a Republican take over the Senate.

I think the House was always a little bit more in question.

There was a legitimate scenario, a reasonable scenario where Democrats could flip the house even if Trump won.

Um I think that's becoming less realistic and so a Republican sweep, but keep in mind, Brian, when we talk about sweep, you know, in the Senate especially, you still need to get to 60 votes to have effective control the Zeal Washington line, you can have the majority but not have control.

And so Republicans will still be short of 60.

So they'll have nominal control of Congress and the White House if the scenario plays out, obviously, but maybe a little bit less control than people expect.

15 seconds left.

Terry best sector for a Trump trade 2.0 industrials, industrial manufacturing, returning back to the US.

Y all right.

Guys really, uh we really appreciate this round t very critical time moment for this country and also for investors, Steve F chief Washington Policy strategist, Brian Gardner CJ Lawrence portfolio strategist, Terry Garner Junior, and our very own Washington correspondent, Ben works show good to see you both.

We'll talk to you soon.

Thank you guys.

And that's, and that's it for the latest episode of opening bid.