Former President Donald Trump is now promising almost a dozen different tax cuts if he is elected President on November 5th.
Of course, there isn't much talk from the Trump folks regarding how to pay for all these tax cuts. And to add insult to injury, Mr. Trump is proposing massive tariffs on almost everything that is imported into the United States. These across-the-board tariffs would cost U.S. consumers dearly as price inflation on almost everything would be almost impossible to avoid.
Most major U.S. stock indices are now at record all-time highs. It's not hard to speculate that this latest surge in share prices is related to Mr. Trump's recent uptick in the election polls. Who doesn't like the idea of tax cuts? Of course, their negative impact on the Federal deficit would be in the trillions of dollars, and passage through Congress would be unlikely at best.
I believe the American people know political "pandering" when they hear it, and I strongly suspect that Mr. Trump's recent uptick in the polls will be temporary and short-lived.
And if the recent surge in U.S. stock prices is tied in part to Mr. Trump's improved standing the polls, then any setback to his campaign is likely to result in a correction in share prices as well.
Even though oddsmakers are now projecting a Trump victory on November 5th, I continue to believe that Vice President Harris will prevail. I also believe that Democrats will retake the majority in the House of Representatives AND that the current majority in the Senate will remain in the hands of the Democrats.
In the U.S. financial markets, equity prices look vulnerable to at least a 10% correction while bond prices look reasonable (and a safe place to park idle cash).
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