Wall Street Outlook "Trump 2.0": The First Two Years in Office Will Have "Far-Reaching Impacts"

Trump 2.0 is back, and the market is once again looking forward to several major policies that Trump may introduce.

On Sunday, Stefan Gratzer, head of wealth management at JPMorgan Chase's Swiss institution, stated that if Trump makes policy adjustments regarding taxes, regulations, and cryptocurrencies, the first two years of his second term could be "quite influential."

The market is generally optimistic that Trump's promises of tax cuts and deregulation will bring a new wave of growth to this round of the U.S. stock market bull run, with the credit market also welcoming a healthy fundamental backdrop, while the Federal Reserve tends to continue maintaining an accommodative monetary policy.

Tax Cut Plan is Key

Trump's victory has completely ignited the cryptocurrency market, with Bitcoin breaking through $81,000 and Ethereum's market value surpassing that of Bank of America. Some analysts believe that this wave of increase may just be beginning and is expected to continue until Trump takes office. Gratzer stated:

“The truly distinctive aspect of Trump's policies is cryptocurrency, so let's wait and see how this develops. There is currently a lot of discussion about deregulation, which is clearly beneficial for banks.”

Gratzer also mentioned that Trump's tax cut plan is crucial.

“If you buy the company's stock, you are clearly buying their future earnings minus taxes. If tax rates are lower, your stock price will rise.”

Currently, the Republican Party regained control of the Senate in last week's elections and is expected to maintain a majority in the House of Representatives. Gratzer stated, “Clearly, both the House and the Senate are now on his side. But after the midterm elections in 2026, it may not be so easy to do these things.”

Optimistic Outlook for the Credit Market in the Short Term Post-Election

In recent years, the rapid growth of private credit has sparked discussions about strengthening regulation and scrutiny. Morgan Stanley analyst Vishwanath Tirupattur believes that with the Trump administration coming to power, the new regime will focus on deregulation. This increases the likelihood of unleashing "animal spirits," thereby driving corporate transactions.

Tirupattur believes that current corporate merger and acquisition activities still have significant room for growth relative to the size of the economy. Especially in a loose credit environment, companies find it easier to obtain financing. Although debt-financed mergers and acquisitions may start relatively slowly, considering the continued decline in interest rates, this growth momentum is expected to accelerate in the future.

The rise of yield buyers (mainly life insurance companies) has been a significant factor driving the credit market in recent years. In a high-interest-rate environment, the sales of fixed annuity products have surged, injecting substantial funds into the credit market.

Tirupattur expects that by the end of 2025, the policy interest rate will be around 3.5%. This means that the policy interest rate will be high enough to maintain strong momentum in fixed annuity sales and sustain yield buyers' demand for credit instruments.

Therefore, with the new policy regime taking effect, the short-term setup of the credit market post-election is healthy. In the medium term, however, due to tariffs potentially having negative impacts on growth and inflation, the uncertainty of credit fundamentals may widen.