New Delhi

During Donald Trump's first term in office, Wall Street learnt one thing: he uses the stock market as a scoreboard. Back then, Trump even contemplated removing Federal Reserve chairman Jerome Powell, whom he held responsible for a deep selloff on Wall Street. At one point previously, the president-elect claimed credit for stock market gains.

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Trump is now preparing for a second term as president, and the stock market is in the front and centre again. The catch is that he's also bringing economic policy ideas that many experts believe might lead to slower growth and higher inflation.

Investors have enjoyed the S&P 500 index's more than 50 per cent increase since the beginning of 2023. Their best hope for maintaining market momentum into 2025 and beyond would be Trump's reluctance to do anything that could halt the rally.

Eric Sterner, chief investment officer at Apollon Wealth Management, said, "Trump considers the stock market performance as an important part of his scorecard." the CIO said, "he regularly started his speeches as president in his first term with the question, ‘how’s your 401k doing?’ when the markets were riding high."

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Sterner added, "So he clearly does not want to create any policies that threaten the current bull market.”

The S&P 500 index had its greatest trading session after election day ever following Trump's victory on November 5. US equity funds received a whopping 56 billion dollars in the week ending November 13, the highest since March. Despite a little decline last week, the Dow Jones, the technology-heavy NASDAQ, and the S&P 500 have all reached several milestones since election results day. The investment community has extensively discussed every one of Trump's policy risks. 

So, where does all this excitement come from?

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Wall Street expects that if Trump's own policies lead to a falling stock market, he will revoke them.

Emily Leveille, portfolio manager at Thornburg Investment Management, said, "If some of these (Trump) policies start to impact his popularity, start to impact the stock market in a way that he perceives as being negative, I think that he’ll pivot.”

Or, as Barclays strategists wrote in a note to clients, "We think the president-elect should be taken seriously, but not literally."