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Trump ramps up stimulus expectations ahead of midterm elections, Wall Street bets on cyclical stocks strengthening
Summary: As the US midterm elections approach, Wall Street is interpreting a series of recent economic statements by Trump as broad signals for growth, betting that he will fully stimulate the economy and consumption before November, benefiting cyclical assets. Market insiders point out that from continued calls for interest rate cuts to proposing a cap on ...
As the US midterm elections approach, Wall Street is interpreting a series of recent economic statements by Trump as broad signals for growth, betting that he will fully stimulate the economy and consumption before November, benefiting cyclical assets.
Market insiders point out that from continued calls for interest rate cuts to proposing a cap on credit card interest rates, the core goal of the Trump administration is to maintain economic activity and affordability for the people. Investment banks generally believe that this policy orientation is more favorable for cyclical sectors such as industrial, raw materials, and non-essential consumer goods, rather than defensive stocks.
Raymond James stated in a recent report that with strong expectations for monetary and fiscal policies, and Trump frequently releasing growth-promoting signals, the market finds it difficult to bet on the failure of economic cyclical recovery. UBS also pointed out that the related policies are more election-oriented, with voters still focusing on prices, housing, gasoline, and interest rates.
Although Trump's proposal to cap credit card interest rates temporarily suppressed bank stocks, UBS believes that even if the policy is implemented, it may be temporary and have limited coverage, with a controllable long-term impact on the financial sector, viewing the pullback in bank stocks as a buying opportunity. JPMorgan Chase also bullish on cyclical stocks, expecting slowing inflation to create room for further economic stimulus in 2026, driving outperformance of economically sensitive sectors over the market.
However, from an index perspective, the S&P 500 index is approaching the 7000-point integer mark, historical experience shows that the market often experiences volatile adjustments before breaking through important integer levels. BTIG pointed out that in the past five attempts to break through thousand-point integer levels, there have been four instances of temporary pullbacks.
Overall, in the short term, market sentiment may fluctuate due to policy uncertainty and earnings season, but most institutions still believe that with the support of growth expectations and improved corporate profits, cyclical stocks are expected to become an important theme in this round of the market.
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