Wall Street investors are cautiously optimistic that President-elect Donald Trump will deliver on his promises, as he seems to be hearing what they want to hear. Key areas where the market is getting reassurance from Trump include trade policy, the government deficit, and monetary policy.
In trade, Wall Street has welcomed Trump’s choice of Treasury Secretary Steven Mnuchin, who is seen as a proponent of free trade. Additionally, Elon Musk, Tesla CEO, has been assigned to find ways to cut federal spending, which may help reduce the national debt. However, some experts caution that the deficit reduction efforts might be more challenging than expected.
On monetary policy, Wall Street takes it for granted that Trump will leave the Federal Reserve’s independence intact. Despite concerns about his past attempts to pressure the Fed during his first term, Trump has already signaled that he won’t fire Chairman Jerome Powell.
The uncertain outlook on which policy promises Trump will fulfill creates a complex backdrop for the Fed’s upcoming interest rate decision. While officials are expected to cut rates this week, their forecasts for next year’s policy may vary significantly depending on how White House policy shapes up.
Investors remain excited about the potential benefits of a Trump presidency, while discounting concerns about its negative aspects. However, the market is waiting to see if Trump will follow through on his promises, and whether any potential drawbacks will materialize.
As economist Thomas Simons said, “The proof will have to be in the pudding.” Will Trump’s agenda align with Wall Street’s expectations? Only time will tell.
Source: https://www.nytimes.com/2024/12/17/business/economy/trump-wall-street-promises.html