Trump Increases Stimulus Expectations Ahead of Midterm Elections, Wall Street Bets on Cyclical Stocks Rally

BlockBeats News, January 13th: As the US midterm elections approach, Wall Street is interpreting President Trump's recent series of economic statements as a "broad growth stimulus signal," betting that he will spare no effort to stimulate the economy and consumption before November, thus benefiting the performance of cyclical assets.

Market participants point out that from continuously calling for interest rate cuts to proposing ideas such as capping credit card interest rates, the core goal of the Trump administration is to maintain economic activity and affordability for the people. Investment banks generally believe that this policy orientation is more favorable for cyclical sectors such as industry, raw materials, and non-essential consumer goods, rather than defensive stocks.

Raymond James stated in a recent report that given the strong expectations for monetary and fiscal policies, and the background of Trump frequently releasing pro-growth signals, the market finds it hard to bet on the failure of an economic cyclical recovery. UBS also pointed out that the related policies are more election-oriented, and the core concerns of voters are still prices, housing, gasoline, and interest rates.

Although Trump's proposal to cap credit card interest rates once suppressed bank stocks, UBS believes that even if this policy is implemented, it may be temporary and have a limited scope, the long-term impact on the financial sector is controllable, and the pullback in bank stocks is seen as a buying opportunity. JPMorgan Chase is also bullish on cyclical stocks, expecting that slowing inflation will further stimulate the economy by 2026, creating room for outperformance of economically sensitive sectors over the broader market.

However, from an index perspective, the S&P 500 index is approaching the 7000-point integer mark. Historical experience shows that before breaking through important integer levels, the market often experiences volatile adjustments. BTIG pointed out that in the past five attempts to breach a thousand-point integer mark, there have been four instances of phase retracements.

On the whole, in the short term, market sentiment may fluctuate due to policy uncertainties and earnings season, but most institutions still believe that with the support of growth expectations and corporate profit improvement, cyclical stocks are expected to become a key theme of this round of the market.