Markets are cautiously optimistic as Trump returns to the White House By Reuters

By Suzanne McGee and Saeed Azhar

NEW YORK (Reuters) – Investors welcomed Donald Trump’s second inauguration on Monday, saying it heralded a trade agenda and that they were relieved that protectionist trade policies could be implemented more systematically than many had expected. who were afraid.

Trump enters office with a sweeping plan of trade reform, immigration, tax cuts and regulation that has the potential to increase US corporate profits but could also rein in inflation, suppress stocks and bonds and forcing the Federal Reserve to increase lending rates.

In his inaugural address on Monday, Trump pledged to boost the US oil, gas and energy industries, curb immigration and reiterated his goal of collecting “a large amount” of tariffs. Investors, who are preparing portfolios across asset classes, say they are keeping watch, waiting for signs of how the measures will be implemented.

“A lot of what he’s talking about is going to help grow the growth and profitability of businesses,” said Jack Ablin, chief investment officer at Cresset Capital.

“But many will come at a cost. We will need to see more income growth to make even a small increase in interest rates that can follow higher rates” and other proposals, he said.

Despite talking about his proposed tariffs, Trump stopped short of taking strong rate action in his first hours in office, which worried many investors, prompting a rally in relief in world stocks, while other major currencies were against the dollar. Instead, Trump will issue a broad trade memo on Monday ordering federal agencies to review US trade relations with China, Canada and Mexico.

“The biggest reaction is what appears to be a delay in rates. Of all the proposals being presented, this is the one that would have the most impact on the market,” said Rick Meckler, a partner at Cherry Lane Investments. New Jersey.

“When you say you’re going to study and try to negotiate after you say you’re going to do it on Day One, I think that’s encouraging for the market.”

Stock futures traded off after the inauguration, and index contracts rose 0.4% later in the day, while the dollar fell and the peso gained slightly. US exchanges were closed for trading in honor of the Martin Luther King Jr. holiday.

During his election campaign, Trump vowed to impose tariffs of 10% to 20% on global goods to the US and 60% on goods from China, but investors say Monday’s signs are that the new administration will take a more measured approach.

“It is too soon to declare that the worst of the threat of tariffs is over. But indeed, Day One went better for international trade than many feared,” Chris Turner, head of global markets at ING, wrote in the letter. .

PROMISE PROMISE

Elsewhere in the market, Trump’s promise to ease regulation lifted bank stocks and sent cryptocurrencies higher.

While reporting rising profits, Wall Street executives told investors this month that the incoming US administration will be easy on business and good for banks.

The cryptocurrency industry expects Trump to fulfill the promises of the “crypto president” by creating a federal bitcoin stockpile, giving crypto companies access to banking services, and creating a crypto council, Reuters previously reported.

Trump also brought up a so-called cryptocurrency that rose on Monday to more than $8 billion in market value, raising ethical questions.

After Trump’s Monday speech, the price of bitcoin remained low at $107,000 overnight, about $104,000, while the market is waiting for special cryptocurrency announcements.

In the first year of Trump’s first administration, the S&P 500 rose 19.4%, after a 5% rally in his first 100 days in the Oval Office. Throughout Trump’s first term, the S&P 500 has risen nearly 68%, but markets have seen a sharp decline, caused in part by Trump’s trade war with China.

After Trump’s last address, in January 2017, the S&P 500 ended up 0.3% on the day. Due to the holiday, business response at this time will not be seen until Tuesday.

Some investors said they are still in a wait-and-see mode.

“The big question on investors’ minds right now is going to be ‘how’ – how are you going to cut costs and lower inflation and lower interest rates,” said Josh Strange, president of Good Life Financial Advisors of NoVA. financial consulting firm. .