The Trump scholarship boom may not be what it seems

Content of the article

Is the Trump trade rally really a thing?

Since then, stocks have been on a tear Donald Trump claimed victory in The United States election last week. The S&P 500 posted its best week in a year, gaining 4.7% and breaking the symbolic 6,000 mark for the first time.

“Trump’s election victory has set off a wave of speculative investor behavior that mocks even the moves we saw after his November 2016 victory, which actually came as a surprise,” he wrote. David Rosenberg from Rosenberg Research & Associates Inc. in his note this morning.

Content of the article

“Even with much more inflated valuations, the stock market rally in the first week after the vote more than doubled what we saw in a similar short time frame eight years ago.”

The euphoria peaked on Monday, with one strategist predicting that the “animal spirits” unleashed by Trump’s policies would send the S&P 500 to 10,000 by the end of the decade.

Ed Yardeni raised his targets to 6,100 for this year, 7,000 for 2025 and 8,000 for 2026, Bloomberg reports.

“Equity investors are also excited about the regime change to a more pro-business administration promoting tax cuts and deregulation,” Yardeni wrote in a note on Monday.

“The spirit animals have returned.”

And investors seem to be jumping on that bandwagon. Exposure to U.S. stocks rose to the highest since 2013 after the election, with fund managers overweight U.S. stocks almost tripling, according to a Bank of America study.

Others question the “Trump is good for stocks” narrative.

Hubert de Barochez, senior market economist at Capital Economics, also sees big gains for futures markets, but not because Trump is in the White House.

Content of the article

Content of the article

Capital believes Trump’s policies will actually be a headwind for stocks as his second term “proves to be neither pro-growth nor pro-business.”

Trump can deliver tariffs and immigration restrictions through executive actions, but they will affect the companies’ profits and prospects, de Barochez said.

And economists doubt it will be able to deliver tax reductions he promised, hopes that are a key factor in the market rally.

Capital has been bullish on stocks for a while and expects the S&P 500 to continue making strong gains, hitting 7,000 by the end of 2025 — but their forecast has nothing to do with the new president and everything to do with artificial intelligence.

“Our bullish outlook for stocks is based on our view that enthusiasm for artificial intelligence will grow further and outweigh any headwinds from Trump’s policies,” de Barochez wrote.

But here’s the twist. Capital believes that when the S&P 500 hits 7,000 on “AI hype,” the bubble will have burst.

“The result is that we expect Trump’s second term to be associated with very weak US equity returns, albeit only partially reflecting the policies his administration is delivering,” de Barochez wrote.

Content of the article

Register here to get Posthaste straight to your inbox. of email.

One of the things that stood out in a recent release of the provincial gross domestic product the numbers is how economies across the country are faring. The gap between the strongest and weakest provincial growth was 1.7 percentage points in 2023, the smallest in 30 years, said Robert Kavcic, senior economist at BMO Capital Markets. Since 1994, the average gap has been 5 percentage points.

“Unlike past environments where resource booms/declines have caused major declines in growth performance in Canada, this environment is very even,” Kavcic said. “All the provinces have faced similar problems to some extent – inflation, interest rates and very strong population growth.”

Newfoundland & Labrador is an exception, but its GDP tends to change significantly during temporary production disruptions, he said.

• Canadian Club Toronto hosts Maple Leaf Foods Executive Chairman Michael McCain on climate change policy, greenwashing and greenhushing.
• Today’s dates: Canadian Building Permits
• Earnings: Shopify Inc., Finning International Inc., Linamar Corp., Power Corp. of Canada, Suncor Energy Inc., H&R Real Estate Investment Trust, Orla Mining Ltd., CAE Inc., Home Depot Inc., Mosaic Co., Tyson Foods Inc.

Content of the article

Recommended by Editorial

1. 

   Canada’s ‘uneven recovery’ is leaving the middle class behind

2. 

   Canada’s deficit could grow more than we thought

---

The recent declines in Canadian interest rates have been a wonderful thing for some, but others are seeing the return on guaranteed investments drop rapidly. If you’re looking to earn six percent or more from an investment portfolio, you’ll need to look elsewhere than GICs and money market funds. Ted Rechtshaffen explores the options.

---

Hard earned truths

In an ongoing series on what the next generation needs to know to build wealth, we deliver the hard-earned truth #5: A single stock can ruin your returns. Whether you own a few high flyers that can crash unexpectedly, or you’re missing out on big winners, a small number of stocks can generate a large portion of the market’s gains or losses.

---

McLister on mortgages

Want to learn more about mortgages? Mortgage Strategist Robert McLister Financial Post column can help navigate the complex sector, from the latest trends to funding opportunities you won’t want to miss. Plus check out his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Content of the article

Financial Post on YouTube

Visit Financial Post’s YouTube channel for interviews with Canada’s leading experts on business, the economy, housing, the energy sector and more.

Today’s posthaste was written by Pamela Heavenwith additional reporting from Financial Post, The Canadian Press and Bloomberg staff.

Have a story idea, pitch, embargoed report or suggestion for this newsletter? Email us at [email protected].

Bookmark our site and support our journalism: Don’t miss the business news you need to know – add financialpost.com to your bookmarks and subscribe to our newsletters Here

Content of the article