What markets bet President Trump will do
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On the morning after the election, as americans were still processing the results, people with money were making moves. I'm talking about investors, traders, hedge fund, wall street types. Right now, the is lying .

around the news that former president trump will be named the seven president .

of the united states. You surging this morning as investors reacted on the terms winning a second presidential term, cypher, currencies rating, big timer, seeing coin now above seventy .

five thousand. The financial markets had some major reactions to former president Donald trumps win. And if you read between the lines, if you break down what these financial types were buying and what they were selling, you can learn a lot about where the economy might be headed, at least where people were willing to bet the economy is heading. Hello and welcome to planet money.

I'm just go in amErica barriers and i'm Sally .

home and I am p. romer.

Yes, all four of us have assembled today to think about a big question. What could the next four years look like for the economy?

Well, as a candidate, trump promised all kinds of things, from lower taxes and lower inflation to a lot more terrace.

But how much of that actually comes to pass? Kind of anyone's guesses.

yeah. And one of those guesses comes from from people who are making big financial bets on what will happen to the country.

So today on the show, we are going to decode all of the signals coming from the markets after the election, what went up, what went down and most importantly, what does that mean for the rest of us?

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We're gonna code how the stock market reacted to trump swing and what that tells us about what wall street thinks the next couple years are gonna look like. Now one of the most dramatic things that happened on the day after the election is that stocks overall, sd down, the S N P, the naz deck, they all hit record highs on wednesday. A lot of that overall Spike in stocks can be explained by the simple fact that trump promised to cut taxes on companies, which companies, of course, love also.

That was exactly what he did the last time he was president. This time, he says he's going to cut corporate taxes even more. But if you look more closely, certain parts of the stock market went way up and other parts went way down. And that gives you some interesting clues about what trump s swing might mean for different parts of the economy and for our country. So to start off, we're onna defer why some specific parts of the stock market went way up after the election.

And that's where I come in. Eric balis, hello.

Hi jeff guo, so era, you looked at three sectors that seem to benefit the most from trumps win.

right? The three serge's sectors. And for this, I spoke with art hogan. Art is a long time market strategist, and he told me that every four years, the presidential election is a very busy week for analysts, strategists and market watchers.

Kind of one of our super balls, right, is the super bowl of information .

overload for everyone. Yeah, a frenzy of trading and activity. First stop on our list of these sergius sectors in the stock market. Banking financial companies like japan Morgan chase, while spargo bank of amErica golden sacks were up by as much as thirty percent.

That's that's like oh, a lot .

exactly and lots of smaller regional banks their stocks were up to. And do you want to guess .

why I say it's probably deregulation.

exactly. And that's what art said to.

It's clearly stated part of the republican platform coming in that our regulations are too tight and we need to relax that to spur more economic activity.

One of the big things trump famously is not a fan of is what he sees as heavy handed regulation and one industry that's very heavily regulated, our financial companies, especially since the two thousand and eight financial crisis.

So people think trump is gonna roll back regulations on banks.

Yeah like for instance, the government requires banks to keep a certain amount of money in reserve, kind of like a rainy day fund, and IT requires larger banks to go regular stress test. But the last time trump was president, he rolled back some banking regulations for smaller banks, and that opened up the possibility for those banks to take on more risk.

right? I remember when silicon valley bank failed last year, there are people who are blaming those loser regulations.

yeah. And IT is not just banks like credit card company shares. They also went up probably because trump is not a fan of the consumer financial protection bureau, because the C F, P, B creates no pesky regulations like they recently put a cap on how much credit cards can charge us in late fees.

which is for us, but probably bad for the credit .

card companies. Yep, yep. Now that sergey, sector number one surge, sector number two was cyp to the united states.

will be the cypher capital of the planet and the bitcoin superpower of the world that will get IT done.

The day after the election, bitcoin was at a new historic high and crypto company stocks surged as well. Jeff, go. Do you wanna guess why OK OK is .

IT more deregulation you .

up right now, the securities and exchange commission, the agency that regulate tes investments, the S. C, C, has been trying to crack down on crypto companies. And trump has said on day one, he'd replaced head of the S. C. C with someone who's more crypto friendly.

Okay, so number one, we have bank stocks went up. Number two, we have cyp to went up. What is number .

three on the list of sergius sectors of the economy? tech. Now this was not every tech stock, but a lot of them like alphabet, microsoft entire NVIDIA. And jeff, do you want? Na.

guess why? I'm feeling like there's a pattern here. So i'm going to say deregulation.

Is that your final answer?

Yes.

you are correct. But also, but also, but also anti trust.

Okay, I think and I trust counts as a type of regulation.

regulation a jacket. It's it's like the government .

regulating how big companies can get regulating .

monos at the biden administration has been very anti trust heavy. It's especially gone after big tech. It's spiled major lawsuits against amazon, google, apple. Now trump has not always gotten along with the big tech companies, but art says IT seems like sters believe the trumpet administration would be a lot wisher on this kind of antitrust stuff.

And I think that the new administration might be more favorably inclined to say, no, that's not a monopoly.

okay? So under trump, the age of big tech companies might continue. You are right. So to sump up, three industries that really surged after the election were banking, crypto and big tech. And the common denominator for all three seems .

to be deregulation.

deregulation.

No more rules. Wild west, maybe, maybe, you know.

Well.

thanks for that area. Thank you.

So far, we've been talking about things that have gone up after the election. Now we're gona talk about some things that went down for that. We are turning to planet money host Sally helm.

bringing us down. Jeff.

hello to youtube. Sally.

hello.

So tell us about some of the industries that people are betting against and why.

right? So I ddt about this with sam stovall, who is the chief investment strategist for C F R. A research. Sam, how many times a day would you say that you usually think about the stock market?

It's more a question of how many times do I not think about the stock market sense? It's both my vocation and evocation so rare .

that I get to talk to someone about their avocation. Jeff, that means that he looks at the stock market for his vocation, his job, but also like the hobby for fun. He told me he sometimes even dreams about IT.

And okay, so to start this off, I wanna give you a few examples of companies that people seemed to be bedding against after the election. Volkswagon, the german car maker, dollar general, the U. S.

Discount store. And this is not a company, but soybeans. Immediately after the election, soybean futures were down. And what you sites all of those trades is one of trump's biggest economic policy proposals. Terf president .

electron has basically said his favorite word in the dictionary is terf.

So tariff is attacks on imports. President electron p was a big fan of terf in his first term, and this campaign he has floated the idea of a ten to twenty percent tariff on all imports. And he has also proposed very high terrain on specifically coming from china .

yeah and these terms they would be way more than the terms he put into place the first time he was president.

true. And the market seems to be expecting that at least some of these terrorists could happen. And you can see that through those three examples that I mentioned. So let us look at, number one, this wagon.

Okay, that makes sense, folks. Wagon is a foreign car company. And if there is going to be a higher tariff on those foreigners when they get imported, the cars are going to get more expensive for american customers, and americans will buy fewer of them.

right? But then we get to number two, dollar general. Their stock also went down, up for the election.

And dollar general, that is A U. S. company.

D IT is IT is headquartered in tennessee. But setled me, a lot of their cheap goods come from overseas. You know, that's part of their business model.

Their attraction to consumers is cost. And if they can purchase items that cost very little to produce, they were produced in vietnam, in china. Well, if there is going to be a tariff and additional charge placed on these items produced overseas, that is going to be passed to the consumer.

right, which could hurt companies like dollar general as part of their soul is that the good arts will be tube.

exactly. This could also be what's going on for a company like welfare. They were also down after the election. But of now we get to the last example, which is a weird one, soybeans.

Soybeans, which are not a company.

No, not a that's not a, not yb. Ans.

no, no, no, a great right in us.

We sell a lot of them in china.

And so the worry is tit for that. If the U. S.

Increases its terrace on chinese imports to the U. S. Well, then china will increase terrace on U.

S. Exports to china. So IT being among them.

This prediction is trade more. That happened under the first trip administration, right? China slapped a tariff on our soybeans. So the markets vision is a world with more trade barriers kind of in all directions. And in fact, global shipping companies were also down, maybe because in a new reality where there's less trade, there wouldn't be as much need for them.

All right? So so to break cap, as we heard from era, the stock market overall is up. Some stocks are way up, but some of the specific companies that are down right now might be down because they could in some way be heard by these potential typhus, correct?

But there is actually one more marker prediction that I want tell you about, jeff, another sector that is down. And this one is interesting to me because IT exposes maybe a weakness of some of these market predictions. So after the election, a lot of renewable energy companies were down like wind and sollers stuff like that.

I guess maybe that's not surprising because trump was kind of this drill baby drill type candidate. So you think he might undo some of the big investments president biden has made in renewable energy.

right, largely through the big climate law. The inflation reduction act of the I. R A, which created all these subsidies and tax credits to help people buy solar panel and rr cars, also tried to incentivize companies to produce more of those things domestically. And president trump has suggested that he wants that law gone.

My plan, terminate the Green new deal, which I call the Green new sm greatest scam and history.

Probably it's unclear whether by that he means the I R. A. And he has also for me to resign I R, A. spending.

Yet trm wants to take back on spend I R A money. And that, by the way, is Robinson mayor, the founding executive editor at heat map news. He covers climate really closely. So he was a good person to ask about whether this market prediction will come true. People would be trading on the idea that trump might go through with IT. But wrong told me the irri could be hard to repeal because IT is built such that the benefits of the law are spread out to a lot of companies and districts and voters. And so it's gonna have a maybe surprising political coalition behind IT.

A lot of rest benefit the ira. So if strict supported for trap twenty twenty receive three times more funding from the I R, A than districts that voted for biden.

Yeah like there's a lot of sun in the sun belt, jeff. There's a lot of wind and planes. And so a lot of these new factories that the ira helped spon are in red and purple areas, georgia, CarOlina, taxes.

And once you have created a good manufacturing job in georgia, like people are gonna fight to keep IT. And so that we have seen some evidence that, that is happening. Earlier this year.

eighteen house republicans wrote to speaker mike Johnson and said, hey, stop saying you're onna repeal the I R A because it's really bad for us.

That's interesting. I mean, it's not a group, but sort like widely for its climate commitment. No.

it's I mean, this is not a very this, how is Robert caucus is not a very climate friendly group of people.

rob said. If we keep seeing that kind of thing, pass voters and companies agitating to keep jobs and subsidies, then maybe the I R A will survive.

interesting.

Yeah I mean, he thinks it's going to be a big fight. And you know the markets immediate got reaction seemed to be the I ra will lose that fight, which could turn out to be true. But of course, this is gna play out in the political arena like it's not going to be decided by the traders, though i'm sure they will be watching closely and continuing to make their .

bets total way. Sally home, thank you so much.

Thank you off now.

IT is not just specific stocks or industries or crops whose fortunes are rising or falling after the election these past few days, the market has also been sending signals about the larger economy. Do the wall street types think that trump is gone to make good on his promises to lower inflation? Do they think that the economy overall is headed in a good direction? We're going to code all of that after the break.

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So far today, we've been mostly talking about the stock market, but now we are going to turn to a different market, one that gives us a glimpse into what finance types think is onna happen to the economy as a whole. I'm talking about the giant twenty eight trillion dollar market for U. S. Treasury bonds. And for that i'm going to bring in planet money host Keith romer.

Hello, jeff.

So keth treasury bonds.

what a market? Am I right?

yes. So what's been going on there?

So treasure bonds, as you know, they are basically I O use from the U. S. government. Whenever the government needs to borrow money.

which he does like all the time, right IT borrow IT .

in the form of these I O use, they pay a guaranteed amount of interest. And if you buy one in to change your mind, you can just sell IT on to somebody else. This happens all of the time.

The treasury market is a giant, giant, giant market. And once IT became clear that Donald trump was going to be the next president, lots of people decided to sell their treasuries, the Price for treasury ies would weigh down. So I, who is the chief investment officer in charge of fixed income at Franklin templeton SHE, told me this was a big deal .

for the treasure ury market to move by this much in a very short period of time. That shows you a big move in sentiment. And that's what we so that's what happened this last week.

Ten year treasuries, which is the named suggest ure over ten years. On wednesday, they had the biggest one day move in over two years. Now the way people in bond world talk about this is there was a big increase in bond yields.

yields. They go up when Prices go down. But because IT is a little easier to make sense of, we are going to be talking about bond Prices today anyway. Anne says the important thing here is not just how big that downward move in treasury Prices was, it's what a move that size means.

Now all this is a question of what people believe is going to happen, and this is where I think that gets really quite interesting.

Sall says, think of the treasury market as offering a prediction, a prediction of what the economy will look like in the future. When folks in the treasury y market knew for certain on wednesday that Donald trump would be the next president, their picture of the future changed in two ways. We number one was about inflation.

right? So Donald d. Trump talked a lot about inflation on the campaign trail, how he was going to bring down Prices.

But seal says when people sold off their treasuries on wednesday, IT was partly a prediction that trumps policies would not, in fact bring inflation down, but instead would make inflation go back up.

And the logic for the set off is this, if inflation is high in the future, then the value of your government I use goes down, because when it's time for the government to pay back your I O use, those dollars are worthless.

Now I ask, know what was behind why the treasury market thinks inflation will go up?

What was the market looking at? I think the market was looking at two things. First thing was trump is planning on cutting taxes. And a hearing from my corporate taxes.

The assumption is that cutting corporate taxes and reducing regulations will fire up the famous animal spirits, which will encourage corporations hire more, demanded more people. So casing effect that people hope will happen. And that is a part of what markets were reacting to.

people looking forward to that cascine growth. That is part of what drove that big, broad based jump in stocks on wednesday. But in all, says there is a flip side to .

that going. Okay, you cut taxes. Growth looks stronger. Unfortunately, when growth goes too quickly, too soon. Typically, IT also helps inflation in the sense of keeping in fashion up rather than bringing IT down.

By the way, another source of inflation that people have been talking about is all of trumps proposed new turfs, right?

yeah. No, that was interesting to me. And I actually didn't think trumps tell us were that big a part of why the treasury yours move.

For one thing, even though the U. S. Obviously imports a lot of stuff, imports, you know not that big a part of our economy.

Our GDP is so big, it's so enormous that the amount we important export is actually very small fraction of the total. So i'm not saying that there is no impact. I'm just saying it's not to me, the main impact. And this isn't to say that terrorists are a good thing. I don't want that to be the takeaway.

And also all isn't totally convinced, ed, that all of the promise terrorists are actually going to become a reality. So the market, he says, is only pricing in some inflation from terrorist.

okay. So the big treasury cell off is predicting inflation, and the story behind that is potential tax cuts and maybe a little bit of terrace.

exactly. So now we are going to turn to the second related but kind of different prediction, which is about where the market thinks interest strates will go under trump.

And they're like cousins you know interest rates inflation yeah you can .

tell that they're related, but they're different and they lead different lives anyway. The simplest version of the oof story is that markets think interest rates cause number two, will be high under the presidency.

And if you think interest rates are gonna up, you're not gonna to hold onto your government I O use anymore.

right? Remember the I O U, they pay interest. And so if I have an I O U that's paying me five percent interest, but I think next month the government is going to start selling I O use that pay ten percent interest. I am not gonna want to hold on to my five percent interest style you anymore, right? I want to sell IT so I can have my money ready to buy the sweet ten percent interest of you that's coming down the book.

So I guess the interesting question is why the market thought interest rates are gonna up?

Sal says on this one, SHE thinks the markets were mostly reacting to the possibility of big budget deficits that could come as a result of all those tax cuts trump has has proposed.

Both candidates were talking about what I can only consider propagate physical policy.

So like lots of government spending.

and it's worth saying that treasuries have actually been selling off little by little for weeks. But then when IT became clear that trump would be president, we had that giant drop in bond Prices. Chanel says that is partly because deficits under trump are projected to be even bigger than they would have been under commoner Harris.

We had three and half trillion dollars a from the democrats, and we have conservatively seven and a half trillions from the republicans. Really here too. There pretty soon.

You don't get real money. No, because we're already running very, very large physical deficits. And if you need to borrow more money, it's a says this is .

just the law of supply and demand, right? There are already trillions and trillions of dollars worth of treasuries out there in the world. And if the U.

S. Is going to pump out all of these additional treasuries to pay its debts. We might at some point start to outpace the marketplace demand for of those treasury ies.

If you have unlimited demand, it's cool. You can you can charge what you want to charge. But if you increase the supply and you haven't done too much on the side of demand, well, you know, the Price is gonna to come down. All the interesting is gonna to go up.

We're gone to have to start offering ten percent I O S instead of like five percent IOS.

I mean, hopefully neither of those because both of those rates would be really high. But then, yes.

higher rates. okay. So on wednesay all at once. The treasury market made this new prediction about what the economy will look like under a trump presidency.

Yeah, higher inflation and higher interest rates. But these predictions change all the time.

It's true every day. Another new .

prediction here we are recording this podcast on friday afternoon. Prices for treasuries, they are still lower than they were on tuesday, but they have already come back a lot since that giant sell off on wednesday.

Also, soybean futures seem to have recovered. I guess we will just check again on monday to see what the markets think about any stuff then .

or to check the week after that or the week after that.

who knows? Yeah, I think that's kind of one important thing to keep in mind as we've been doing all this market watching on toys show the market it's not innocent. Markets change their minds all the time.

They don't actually know what's gonna en in the future. They're just making educated and sometimes not so educated bets. But by watching how the markets place their bets, you can at least learn a little bit about what the people with money think is gna happen. And that's worth something.

This episode was produced by sam yellow horse tesler and willow rubin and edited by Martini a castro IT was engineered by gilly moon and that checked by swatters Alice gold. Mark is our executive producer.

I'm jeff go amErica bars.

I'm family home .

and i'm keth rumor. This is N. P. R. Thanks for listening.

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