Can President Trump Still Affect Markets?

North American markets, today, Friday, January 15 2021 and viewed several hours before opening at 9:30 a.m. EST, appear poised for a negative open as major indicators are in the red. However, at time of writing the NASDAQ and S&P 500 are improving and might make into it the green before or after market opening.

The Euro, British pound and Canadian dollar are also in the red.

That follows yesterday’s market in which three major trends continued converging:

A tight focus on President-elect Joe Biden’s pandemic relief plan, counterpointed with a weakening labor market and continued numbers of COVID 19 casualties. “The Labor Department’s weekly jobless report showed the number of Americans filing first-time claims for unemployment benefits increased more than expected last week, underscoring the impact of a resurgence in COVID 19 infections,” according to a Reuters report.

Today, analysts and investors will be digesting the contents of Biden’s $1.9 trillion pandemic rescue plan from both an economic and political perspective. From an economic perspective, the question will be whether the huge fund allotments, combined with strategies such as a ban on evictions can turn around the wreckage of those job figures.

From a political perspective they will also be assessing the chances of the plan getting through Congress. Biden needs to arrange enough votes in favor of the breadth and cost of the plan, a task that could be tougher in the Senate than in the House of Representatives. Last week’s victories in Georgia gave the Democrats control of the Senate with a 50-50 division but with Vice-President Kamala Harris’ tiebreaking vote. Aspects of the plan such as its total cost and aid to state and local governments will make it unpalatable to some Republicans while some Democrats feel that it does not go far enough. A couple of defecting Democrats or Republicans could sway the calculus either way.

Moreover, the Senate will be occupied with the impeachment trial of outgoing President Donald Trump.

Also with the potential to move the needle, JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. report fourth quarter results. The reports from JPMorgan Chase and Citigroup will provide clues about loans and spending by consumers and the economic outlook. Wells Fargo’s report will probably include clues on the corporation’s efforts for putting recent scandals behind -- information that is at least as important as its outlook. All three of these banks are down in pre-market trading but JPMorgan and Citigroup will likely post positive results.

Meanwhile, European markets are open at time of writing and major indicators there are in the red and do not show much chance of moving into the green today.

They are being pulled in two directions, according to Joshua Mahony Senior Market Analyst at IG Group, a British financial company. “November GDP data highlights another services-led contraction for the UK economy,” he says. “While Biden's stimulus package will help, the detrimental coronavirus lockdown effects will continue to hold back sentiment.” Mahony adds that fears of increased lockdown measures in Germany, France, and China are eroding optimism.

Another trend currently moving the market is the action in electric vehicle stocks. These are of two types: the single play companies such as TESLA Inc for whom it is their main focus and the legacy companies such as the General Motors Company, Hyundai Motors Ltd. have made their ambitions in this area clear.

A third category of player is companies preparing to supply components to the first two. such as Ballard Power Systems Inc. While growth in all three of these groups seems assured in the present and perhaps even more in a post-COVID 19 world, caution is important, as always, since the share prices may be running ahead of realistic expectations.

The car market may or may not advance as quickly as the stocks suggest, but at the moment automakers such as TESLA and General Motors and downstream manufacturers such as Ballard Power continue appreciating.

In a lesson learned from other industries such as during the original internet explosion, it is within the realm of possibility that given continued expansion.

Major players could raise capital and look to take over the downstream players such as parts manufacturers to insure supply. (There is no suggestion that Ballard Power is currently a takeover candidate.) That could be a positive for the downstream suppliers. Alternatively, they could raise capital and make their own parts, a clear negative for downstream suppliers. For investors, insulating their portfolios from these possibilities might mean trimming positions and/or portfolio rebalancing.

These and other trends will continue moving the market, but a new trend is taking shape: ignoring the actions of a President. Utterances from the White House sometimes cause at least some movement but that no longer applies to outgoing President Donald Trump, Even his second impeachment would not shake the markets as much as might be expected, according to Michael Stark, Market Analyst at Exness, a British online trading operation. “From the perspective of traders, President Trump's second impeachment isn't likely be a big event,” he says. “With less than a week to go until Mr Biden's inauguration, there's really nothing left for Mr Trump to do to affect markets...”

Disclosure: I do not own any shares in any company mentioned in this column

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