Countdown to Trump 2.0: What’s Next for the Market?

 

With Inauguration Day fast approaching (January 20), President Trump and VP JD Vance are about to take office for a second term. The market's already buzzing about what "Trump 2.0" will bring, and whether we're in for a wild ride again.

 

Looking back at Trump’s first term, we saw Bitcoin ($BTC) skyrocket with a jaw-dropping 38x return over four years, the S&P 500 climbing nearly 70%, and strong performances in sectors like energy, banks, and tech. Gold even had a 55% increase over the same period. But as always, the story isn’t that simple.

 

 

Right after Trump clinched victory in 2024, the market was all in on the "Trump trade" hype. We saw a frenzied rally, especially in those key assets like large-cap stocks and, of course, Bitcoin. But fast-forward a few months, and things started to cool off. Inflation worries started creeping in, and the hawkish Fed dampened expectations for rate cuts. We saw the S&P 500 retrace most of its gains since the election, and US Treasury yields shot up.

 

But let’s not forget the golden days—Bitcoin shot up, Tesla kept pushing new highs, and sectors like energy, banks, and tech were rolling in gains. Fast forward to now, and we’re left wondering: will the Trump trade repeat itself?

 

 

Now, let’s get into what Trump 2.0 might actually look like. Word is, Trump is coming in hot with over 100 executive orders on Day 1. Border security, immigration, and energy policies are expected to take center stage. We’ve seen this before—immigration crackdowns, deregulation in energy, and tariffs made quick moves in his first term. If anything, these moves could send shockwaves through the market once again.

 

While the market’s been betting on a smooth ride, inflationary risks are high. If Trump's immigration and tariff policies go beyond expectations, we could be looking at stagflation—stocks and bonds under pressure, but a strong USD. On the flip side, if deregulation and fiscal cuts take center stage, we might see a disinflationary scenario: stocks and bonds soaring, and the USD losing some ground.

 

 

Trump's second term will likely bring a fresh wave of deregulation across various industries. Here's a quick breakdown of sectors that could see some immediate moves:

 

Bank: Trump is expected to lower the Basel III capital requirements for U.S. banks and roll back rules from the Consumer Financial Protection Bureau that restrict credit card fees and banking operations. He’s also aiming to fast-track consolidation in the banking sector by eliminating merger reviews.

 

Healthcare: By increasing market competition and transparency, Trump aims to lower healthcare costs and offer more options. There are plans to undo some of Bernanke-era regulations, which could give states and individuals more flexibility in choosing healthcare plans.

 

Real Estate: Trump is pushing for the relaxation of environmental regulations and a faster permitting process to encourage economic growth. Expect to see a focus on stimulating real estate and construction projects with fewer bureaucratic hurdles.

 

Cryptocurrency: The big one—Trump’s promised to turn the U.S. into the "cryptocurrency capital of the world." He’s looking to reduce regulatory burdens on crypto, possibly even creating a national Bitcoin reserve. This could add legitimacy and stability to the crypto market, while boosting institutional investment.

 

Aviation: Trump plans to roll back recent rules requiring airlines to provide automatic cancellations and refunds to passengers. This could boost the bottom line of airlines, while weakening the influence of labor unions in the sector.

 

Energy: Deregulation in oil and gas development will likely be a priority, with Trump pushing to expedite permits for fossil fuel projects and promote energy independence. Expect quick moves on liquefied natural gas (LNG) exports and a push to undo Obama-era energy policies.

 

 

So, what’s the play now? Well, it seems that there’s still some opportunity left in the Trump trade. Deregulation and reduced government spending should benefit sectors like banks, cryptos, energy, and aviation.

 

Referring to the performance of Trump trades during the election, big financial stocks like JPMorgan ($JPM), Wells Fargo ($WFC), and Citigroup ($C) have all shown gains of over 40% in 2024. Energy stocks have started to rally; since the start of the year, $XLE has risen 6%, leaving the S&P 500 behind.

 

When it comes to Bitcoin and crypto stocks, we saw a crazy spike post-election, with $MSTR and $COINUS surging by up to 80%. But those gains have since pulled back. Still, if Bitcoin can catch another wave, it could be a good time to start eyeing crypto-related assets.

 

Tesla and DJT? Well, this one's tricky. Elon Musk’s close ties to Trump could result in fewer regulations, which would be a huge win for Tesla ($TSLA). $DJT, after a period of silence, has seen a recent surge in trading volume, with increased options activity and rising call option bets. However, I wouldn’t expect it to be as easy as last time. The market’s cautious, and with rising inflation and interest rates, it might be tough for Tesla and other Musk stocks to climb at the same pace.

 

 

Trump 2.0 is just around the corner—what stocks are you betting on? #trump