Planet Money: What Markets Bet President Trump Will Do

In the episode titled "What Markets Bet President Trump Will Do," NPR's Planet Money delves into the intricate reactions of financial markets following the election of former President Donald Trump as the 47th President of the United States. Through insightful discussions and expert analyses, the hosts decode the signals emanating from various market sectors, shedding light on investor sentiments and predictions about the upcoming economic landscape.

1. Introduction: Market's Immediate Reaction to Trump's Victory

Timestamp: 00:41 - 03:30

The episode kicks off by highlighting the swift and significant movements in the stock market following Trump's electoral victory. Hosts Jeff Guo, Erica Barris, Sally Helm, and Ira Glass outline the episode's objective: to interpret the financial bets made by Wall Street professionals and understand their implications for the broader economy.

Jeff Guo remarks, "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."

2. Sectors on the Rise: Banking, Cryptocurrency, and Big Tech

Timestamp: 03:30 - 09:36

a. Banking Sector Surges

Erica Barris identifies the banking sector as one of the primary beneficiaries of Trump's win. Major financial institutions like JPMorgan Chase, Bank of America, Wells Fargo, and Goldman Sachs saw their stocks rise by as much as 13%.

Erica Barris explains, "One of the big things Trump famously is not a fan of is what he sees as heavy-handed regulation."

The anticipated deregulation under Trump's administration is poised to reduce constraints on banks, allowing them more flexibility in their operations.

b. Cryptocurrency Rally

The cryptocurrency market, particularly Bitcoin, experienced a notable surge, with Bitcoin prices exceeding $75,000.

Erica Barris attributes this to potential deregulatory measures towards the crypto industry, stating, "The SEC has been trying to crack down on crypto companies. And Trump has said on day one, he'd replace the head of the SEC with someone who's more crypto-friendly."

c. Big Tech Gains

Big technology firms such as Alphabet, Microsoft, Intel, and Nvidia also witnessed significant stock appreciation. The underlying reason ties back to anticipated deregulation and a more lenient stance on antitrust issues.

Jeff Guo points out, "The Biden administration has been very antitrust heavy. It’s especially gone after big tech."

Investors believe that Trump's approach would be less restrictive, fostering an environment conducive to the continued growth of big tech giants.

3. Sectors on the Decline: Tariffs' Impact on Various Industries

Timestamp: 09:36 - 17:18

Transitioning from rising sectors, the hosts discuss industries that faced downturns due to anticipated policy changes, particularly the imposition of tariffs.

a. Automotive Industry: Volkswagen

A German automaker, Volkswagen, saw its stock dip as markets anticipated higher tariffs on imported vehicles, potentially making them more expensive for American consumers and reducing sales.

b. Retail Sector: Dollar General

Despite being an American company, Dollar General's reliance on overseas-produced goods made it vulnerable. Increased tariffs would raise the cost of imported items, undermining the company's value proposition of affordable pricing.

Sonal Desai, Chief Investment Strategist for CFRA Research, emphasizes, "Their attraction to consumers is cost. If there's going to be a tariff, an additional charge placed on these items produced overseas, that is going to be passed to the consumer."

c. Agriculture: Soybeans

Soybean futures declined as markets anticipated retaliatory tariffs from China—a nod to the trade tensions reminiscent of the first Trump administration's era.

d. Renewable Energy

Renewable energy companies, including those in wind and solar sectors, experienced a downturn. Trump's inclination to dismantle the Inflation Reduction Act (IRA), which subsidized renewable initiatives, cast uncertainty over the sector's future.

Robinson Meyer, founding executive editor at Heat Map News, notes, "A lot of red states benefit from the IRA. So districts that voted for Trump in 2020 received three times more funding from the IRA than districts that voted for Biden."

Despite initial declines, Meyer suggests the IRA's entrenched benefits might shield the sector from complete rollback due to the political support in key regions.

4. Treasury Market Insights: Predictions on Inflation and Interest Rates

Timestamp: 19:35 - 27:40

Shifting focus to the bond market, the episode examines the $28 trillion U.S. Treasury bonds market to glean broader economic forecasts.

a. Treasury Sell-Off and Inflation Expectations

A significant sell-off in Treasury bonds, particularly the 10-year Treasuries, indicated a market belief that Trump's policies might exacerbate inflation rather than curb it.

Sonal Desai articulates, "When folks sold off their Treasuries on Wednesday, it was partly a prediction that Trump's policies would not in fact bring inflation down, but instead would make inflation go back up."

b. Interest Rates Surge

The sell-off also signaled expectations of rising interest rates. Higher projected interest rates reduce the attractiveness of existing bonds with lower yields, prompting investors to divest in anticipation of better returns elsewhere.

Ira Glass summarizes, "Higher rates. But these predictions change all the time. They're just making educated and sometimes not so educated bets."

c. Fiscal Deficit Concerns

The looming fiscal deficits under Trump's administration, fueled by proposed tax cuts and increased government spending, were central to the bond market's apprehensions.

Art Hogan comments, "We have conservatively, seven and a half trillion from the Republicans... Pretty soon you're talking about real money here, because we're already running very, very large fiscal deficits."

5. Concluding Insights: The Fluidity of Market Predictions

Timestamp: 27:40 - End

The episode wraps up by emphasizing the dynamic nature of market predictions. While current trends suggest certain economic directions based on Trump's anticipated policies, the markets remain inherently unpredictable and subject to constant change.

Jeff Guo reflects, "The market is not omniscient. Markets change their minds all the time. They don't actually know what's going to happen in the future. They're just making educated and sometimes not so educated bets."

The hosts underscore the value of monitoring market movements as a window into investor sentiments and potential economic trajectories, while also cautioning against viewing these predictions as certainties.

Notable Quotes

• Jeff Guo [01:11]: "The financial markets had some major reactions to former President Donald Trump's win."

• Erica Barris [05:05]: "Like for instance, the government requires banks to keep a certain amount of money in reserve, kind of like a rainy day fund."

• Sonal Desai [11:13]: "President elect Trump has basically said his favorite word in the dictionary is tariff."

• Robinson Meyer [15:50]: "A lot of red states benefit from the IRA."

• Art Hogan [22:54]: "If you have unlimited demand, it's cool. 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 going to have to come down or the interest rate is going to have to go up."

Produced by: Sam Yellow Horse Kessler and Willa Rubin
Edited by: Martina Castro
Engineered by: Gilly Moon
Fact-Checked by: Sierra Juarez
Executive Producer: Alex Goldmark

This episode of Planet Money offers a comprehensive analysis of how financial markets interpret and react to political shifts, providing listeners with a deeper understanding of the symbiotic relationship between politics and economics.