Billionaire investor Scott Bessent anticipates a stock market rally if former President Donald Trump leads President Joe Biden in general election polling.
“We believe that equity markets are in the midst of a ‘Trump Rally’ that will last as long as he remains ahead of Biden in the polls,” wrote Bessent.
Trump previously said, “I think if I don’t win, we’re going to have a depression like 1929.”
Billionaire investor Scott Bessent backs Trump up with data… his chart shows stocks are up 35.2% when Trump leads Biden versus 3.4% when Biden leads. pic.twitter.com/akcOp3WsDi
— Phil Kerpen (@kerpen) February 1, 2024
“I think the reason the stock market is up is because if you look at the polls, people say I’m going to win. Biden is getting lucky in that regard. I had a phenomenal stock market. Everything was good about our economy. We had no inflation,” he continued.
Bessent’s memo to investors outlines an ongoing “Trump rally” in the markets, projecting a sustained boom if Trump wins.
The memo attributes the market rally to Trump’s lead over Biden and suggests that a Trump victory would bring about market-friendly economic, tax, and regulatory policies.
The memo notes that Biden’s administration is responding to Trump’s lead by pursuing more buoyant economic policies.
“Former President Donald Trump is now the odds-on-favorite to become the Republican presidential nominee in the next 3-8 weeks,” explained the memo.
“We strongly believe that a significant impetus for the recent rally in equity markets is the commanding lead that he holds over President Biden in early polling on both a national basis and in the key battleground states. Liquid asset markets are priced on future probabilities–earning projections, interest rate curves, commodity forward prices to name a few–and, in our opinion, markets are now anchoring on the potential market friendly policies of a Trump victory on November 5, 2024,” it continued.
Bessent wrote in the memo, “Our belief is that for the time being a positive self-reinforcing cycle has been created. As Trump’s lead persists, the Biden administration, led by Treasury Secretary Janet Yellen, would be expected to continue to follow, and perhaps accelerate policies, to keep the economy buoyant, provide ample liquidity, contain interest rates and avoid any more blowups like Silicon Valley Bank. All are extremely equity market positive. The chart below shows that even while the Federal Reserve has been raising rates and shrinking the balance sheet via quantitative tightening, bank reserves as seen in the chart below, turned up in early 2023.”
The memo envisions a potential return to the economic environment of Trump’s early presidency and predicts a new economic “golden age” under a re-elected Trump.
“Third and finally, we have a highly differentiated view of what a second Trump term would look like,” he claimed.
“It is our belief that the prognosticators are wide of the mark in how another administration would run. Our analysis leads us to believe that it would look much more like the period 2017-18 in the first Trump presidency than the more tumultuous 2019-20 period – more Calvin Coolidge than Herbert Hoover,” wrote Bessent.
“Our base case is that a re-elected Donald Trump will want to create an economic lollapalooza and engineer what he will likely call ‘the greatest four years in American history,’” claimed Bessent.
“Economist Ed Yardeni believes that post-Covid America has the potential to have a boom similar to the ‘Roaring Twenties’ of a century ago. We believe that a returning President Trump would like this to be his legacy,” the memo concluded.
