Billionaire investor says a 'Trump rally' is powering markets to record highs
- Scott Bessent is betting on a 'Trump rally' as long as the ex-president leads polls
- He sent a briefing note to investors on Wednesday setting out his forecasts
- And he said recent record gains were driven by Trump's market-friendly plans
Earlier this week, former President Donald Trump tried to take credit for booming stock markets.
And maybe he is right.
Billionaire investor Scott Bessent, a former Soros Fund Management chief, says rising markets are being fueled by polls that show the former president can beat Joe Biden in November's election.
'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,' he wrote Wednesday to investors in his Key Square Capital Management fund.
Trump is the clear frontrunner to claim the Republican nomination.
And a string of national polls suggests he leads Biden in their head-to-head matchups.
The top graph shows S&P 500 returns when Donald Trump has a poll lead in red, and the blue line shows the flatter growth when Joe Biden is ahead in the national polls. The lower graph shows a measure of Trump's poll lead in red and Biden's poll lead in blue
On Monday, former President Donald Trump took credit for record stock markets
That coincided with the S&P 500 hitting a record high in the middle of last month.
Bessent concludes that it was driven by traders with one eye on a future Trump administration that would renew his tax cuts along with other market-friendly policies.
And he illustrated his analysis with a graph produced by Renaissance Macro that showed cumulative returns when Trump was ahead in the polls far outpacing returns when Biden led.
'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,' he wrote.
'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.'
In particular, he said the market was focused on whether Trump cuts, which are due to expire in 2025, would be renewed. That would be much more likely under a second Trump administration.
And he dismissed forecasts that a second term would bring chaos.
'It is our belief that the prognosticators are wide of the mark in how another administration would run,' he wrote. 'Our 4 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.'
He predicted that the former president would preside over an economic boom similar to the 'roaring twenties' of a century ago, built on de-regulation, energy independence and a revival in domestic manufacturing.
Scott Bessent, founder and chief executive officer of Key Square Group, said in a briefing note to investors Wednesday: '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'
The Daily Mail's most recent national poll, conducted in December, showed Trump has a four-point lead over Joe Biden. The results carry a 3.1-point margin of error
J.L. Partners also polled voters in the key swing states of Arizona, Georgia and Wisconsin. The results showed Joe Biden in danger of losing two states that helped him win in 2020
Trump posted Monday that he was responsible for stock market highs
'In conclusion, we believe that as long as Trump remains ahead in the polls or the race is close, the Trump Rally can run right up to the election,' he wrote.
The Dow Jones industrial average passed 38,000 on Jan. 22, a few days after the S&P 500 hit its own record high.
Trump celebrated the milestones with an all caps post on Truth Social.
'THIS IS THE TRUMP STOCK MARKET,' he wrote.
'BECAUSE MY POLLS AGAINST BIDEN ARE SO GOOD THAT INVESTORS ARE PROJECTING THAT I WILL WIN, AND THAT WILL DRIVE THE MARKET UP.'
He also said a Biden election win would be bad for markets.
'I think there will be a crash if I don't win,' he said last month during a town hall event on Fox News.
