Rising expectations that former President Donald Trump will regain the White House in November are supercharging the so-called Trump trade, with views that his policies will lift corporate profits even while spurring worries about the country’s long-term fiscal health.
Stock investors are leaning into corners of the U.S. equity market that could benefit from proposed Trump policies, such as tax cuts and regulatory easing. Treasury markets, however, tell a different story, with investors lightening positions in longer-dated bonds due to fiscal concerns. The Russell 2000 index is up 11% since a debate in late June, while the S&P 500 is up just 3.4%.
Online prediction site PredictIt showed rising bets for a Trump win, while small-cap stocks and crypto companies saw significant gains. However, European carmakers and other sectors could be adversely affected by potential tariffs on foreign imports.