Trump 2.0 and the Financial Markets

Donald Trump's win and the Republican sweep of the House (probably) and the Senate (certainly) is consistent with our Roaring 2020s scenario. Indeed, it increases the odds that the good times will continue through the end of the decade and possibly into the 2030s. Stocks soared today on the widespread perception that Trump 2.0 will include a cut in the corporate tax rate and reductions in business regulations.

The impact of higher tariffs and wider government budget deficits under Trump 2.0 was largely ignored by the stock market, but not the bond market. While the 10-year US Treasury bond yield rose over 4.40%, the S&P 500 climbed 2.5% to a new record high of 5,929. Cyclical sectors that we've been recommending such as Financials, Industrials, and Information Technology (including Communication Services) rose sharply while defensives and rate-sensitive stocks underperformed (chart).