US Stock Market: Tech Stocks Down, Small Caps Up...Cryptocurrency Also Benefits
"There Are Negative Economic Effects...Biden Victory Possible"
With the U.S. presidential election approaching this November, the market is reportedly moving in line with the Republican candidate, former President Donald Trump, Yahoo Finance reported on the 17th (local time).
Yahoo Finance analyzed that the market has been on the rise since former President Trump was shot at during a campaign event on the 13th, and since the controversy over President Joe Biden's age ignited following last month's presidential debate.
According to the election analysis site RealClearPolitics (RCP), the betting market on that day showed a 64.2% rate of bets on former President Trump's victory. President Biden's chances stood at 14.8%. Yahoo Finance explained, "This implies not only a victory for former President Trump but also a higher probability that the Republican Party will control both chambers of Congress."
If this happens, the door will open for former President Trump's key pledge to cut corporate taxes. David Rosenberg, an economist at Rosenberg Research, recently analyzed that investors moving from tech stocks to small-cap stocks classified as value stocks contributed to this Republican sweep scenario. This is because corporate tax cuts are expected to help small-cap stocks catch up with the seven major tech stocks, known as the 'Magnificent 7.'
Cryptocurrency is another beneficiary of Trump. Although former President Trump was once a cryptocurrency skeptic, he has shifted to a pro-cryptocurrency stance in this election to capture young voters and oppose the Biden administration. After the shooting incident involving former President Trump on the 13th, Bitcoin surged by $1,000 within an hour. It then rose an additional $4,500 over the next four days. Investors bet that the failed assassination attempt increased former President Trump's chances of winning.
However, Yahoo Finance pointed out that the economic outlook is not necessarily optimistic even if former President Trump succeeds in his re-election bid. In an interview released the previous day by Bloomberg News, former President Trump said that although Taiwan is a key semiconductor supply chain in the artificial intelligence (AI) ecosystem, the U.S. would not support Taiwan if China attacked it. He also argued that Taiwan should pay the U.S. for its defense. This led to a sell-off in tech stocks, a sharp drop in semiconductor stocks, and the Nasdaq index plunged 2.77% that day. Capital Economics noted that some of the pressure on large tech stocks is related to these remarks by former President Trump.
Additionally, former President Trump's key pledges to raise tariffs on imports and deport illegal immigrants could drive inflation higher. This is because import prices would rise, and wages could increase due to labor shortages.
Yahoo Finance added that according to the Cook Political Report's polls, President Biden is not trailing by even 3 percentage points, making it difficult to be certain about former President Trump's chances of winning.
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