Trump Is Moving Markets as Presidential Odds Rise, Watch Bonds and These Stocks. And 4 Other Things to Know Today.
Presidents love to take credit for stock market gains under their watch, even though experts suggest that whoever’s in the White House has little impact on overall performance.
Having said that, it’s certainly the case that presidents—and other branches of government—are capable of moving markets. And that has been happening over the past few days as investors increase expectations that Donald Trump will be elected in November. President Joe Biden’s shaky debate performance and the Supreme Court decision favoring Trump’s broad immunity have moved the needle.
The story of the S&P 500 and other indexes hasn’t changed much—the big technology stocks are driving gains, the rest aren’t doing nearly as well. Nothing new there.
But the bond market is definitely shifting. Yields are rising even though the latest news on inflation was encouraging. What’s more, yields on longer-term debt are rising more than on shorter term notes, narrowing the inverted yield curve of the past two years. That exists because bond traders expect Fed rates in the future to be lower than they are now. They could be changing their minds if they expect a second Trump term to be inflationary.
Why would they think that? Well, Trump says he wants to cut taxes, which often leads to increased budget deficits and thus more government borrowing. His plans to raise tariffs on imports, particularly from China, is also inflationary. And his digs at Federal Reserve Chair Jerome Powell might make it even harder for the central bank to keep inflation under control.
There are also certain sectors that stand to win or lose with another Trump administration—steel companies, some healthcare stocks, and banks that may benefit from less aggressive antitrust enforcement are a few that could gain. Clean energy stocks are headed for a tougher time.
One thing is clear. Politics is now a major market force.
—Brian Swint
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What’s at Stake for Clean Energy If Republicans Return to Power
Some investors are considering what may happen if former President Donald Trump wins this fall and returns for a second term. The clean energy sector might see a lot of upheaval if Republicans were to retake power but it isn’t all bad news, says Matt Breidert at sustainable investment firm Ecofin.
A Republican administration may stop issuing offshore wind permits, which could be a blow to companies such as Orsted and Vestas. Renewable equipment stocks like solar supplier SolarEdge could also be hurt by changing law, as well as rising competition from China, Breidert said.Only a decisive Republican victory would be a clear negative for clean energy. A split Congress or narrow Republican majorities wouldn’t lead to a complete dismantling of the Inflation Reduction Act, which backs clean energy initiatives. Narrow GOP majorities in Trump’s first term didn’t overturn Obamacare.There is a realistic chance that Trump and a Republican Congress could eliminate some of the clean energy subsidies in the Inflation Reduction Act. But there are other factors driving clean energy stocks, including rising demand for electricity from the tech sector for artificial intelligence and other uses.Solar and wind farms will likely meet much of that demand, because they are cheaper and faster to assemble. New natural gas power plants can take six years to build, but large solar fields can be assembled in less than two years, as long as there are enough transmission lines to serve them.
What’s Next: Electric vehicles also could perform better than expected, despite Republican pressure to cut subsidies. Some companies that would be hurt if Trump removed government support for EVs are Korean manufacturers such as Kia that are building U.S. EV factories.
—Avi Salzman
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Pet Supply Retailer Chewy Rides Meme Stock Roller Coaster
Pet supply retailer Chewy got a dose of meme stock frenzy after the Reddit chat room celebrity trader Keith Gill, also known as Roaring Kitty, disclosed a 6.6% stake. Gill’s holdings were expected to bring out the same speculative activity seen in other meme stocks such as GameStop.
Gill said he owned nine million shares of Chewy, or roughly $229 million based on Monday’s closing price. The official regulatory disclosure followed a cryptic message on X last week: no words, just the image of a dog. That posting spurred a brief spike in Chewy shares.Chewy, founded by GameStop CEO Ryan Cohen, climbed 18% after the filing appeared but closed down 6.6% for the day, a true meme stock roller-coaster ride. Gill helped spark the meme-stock frenzy in 2021 with his bullish posts about GameStop. He reignited it recently, also in GameStop.Chewy’s stock has risen 63% over the past three months after stronger-than-expected earnings and an announced share buyback. Gill’s stake could overshadow what analysts at William Blair see as a fundamental recovery in the second half of this year.At GameStop, Cohen posted on X that the videogame retailer was looking for mobile app developers in Dallas; no college degree required. GameStop shares are up 33% so far this year and 94% in the past three months. Gill disclosed in June he had amassed a stake in GameStop.
What’s Next: Chewy shares could be more volatile because of the association with Gill. The company is due to report second-quarter results in August, with analysts expecting earnings of two cents a share on revenue of $2.8 billion. Its annual meeting is scheduled virtually for July 11.
—Adam Clark, Brian Swint, and Janet H. Cho
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Meta Platforms in EU Sights Over Targeted Advertising
The European Union is targeting core revenue at Facebook and Instagram parent Meta Platforms, which it says violated its new digital competition law. At issue is Meta’s policy that allows users to either pay a monthly fee for ad-free content or consent to Meta using their data for targeted advertising.
The commission said Monday that the choice forces European users of Facebook and Instagram to subscribe, or consent to Meta’s combining of their personal data, and doesn’t provide a less-personalized but equivalent version of Meta’s social networks for those who don’t consent.Meta introduced the no-ads subscription model last year based on guidance from Europe’s top court and said it complies with the EU’s Digital Markets Act. The company reported more than $35 billion in first-quarter advertising revenue, including about 23% from Europe.The DMA is aimed at preventing large digital platforms from abusing their roles as gatekeepers to digital goods and services. “We look forward to further constructive dialogue with the European Commission to bring this investigation to a close,” a Meta spokesman told Barron’s in an email.The EU last week charged Apple with failing to comply with the DMA, saying its App Store doesn’t allow developers to direct customers to alternative ways to make purchases. Apple said it recently made changes to comply with the DMA and is confident its plan complies with the law.
What’s Next: Meta can examine EU regulators’ preliminary findings and respond. If EU officials decide that Meta broke its rules, Meta could face a fine of up to 10% of its global annual revenue. The commission said it would conclude its investigation by late March.
—Janet H. Cho and Adam Clark
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Boston Celtics’ Owners Put the NBA Champs Up for Sale
Just two weeks ago, the Boston Celtics won their 18th NBA Championship, and now the team’s majority owners want to sell the franchise for estate reasons, they said on Monday. The price is expected to beat the $4 billion paid for the NBA’s Phoenix Suns and WNBA’s Phoenix Mercury.
Boston Basketball Partners LLC, which is led by Wyc Grousbeck, said it intends to sell all the team’s shares and a majority interest in the team this year or in early 2025, with the balance of the transaction closing in 2028. Grousbeck would stay as team governor until 2028.Grousbeck headed the group that bought the Celtics for $360 million in 2002. Other NBA franchises have also been sold recently. Entrepreneur Mark Cuban sold a majority stake in the Dallas Mavericks to the Adelsons, a casino magnate family.Forbes ranked the Celtics the fourth most valuable team in 2023, at around $4.7 billion before this latest NBA title. It comes after the Golden State Warriors ($7.7 billion), New York Knicks ($6.6 billion), and Los Angeles Lakers ($6.4 billion).Sports team deals are getting more lucrative, and drawing big Wall Street money. Carlyle Group co-chairman David Rubenstein bought the Baltimore Orioles in March for $1.7 billion, and Apollo Global Management co-founder Josh Harris snapped up the Washington Commanders for $6 billion last July.
What’s Next: Before the owners announced their intent to sell, the team extended the contract of Derrick White, agreeing to a four-year, $125.9 million deal, as it continues to lock down its core players. ESPN has reported the Celtics’ payroll could approach $450 million, including tax payments.
—Janet H. Cho
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Be sure to join this month’s Barron’s Daily virtual stock exchange challenge and show us your stuff.
Each month, we’ll start a new challenge and invite newsletter readers—you!—to build a portfolio using virtual money and compete against the Barron’s and MarketWatch community.
Everyone will start with the same amount and can trade as often or as little as they choose. We’ll track the leaders and at the end of the challenge the winner whose portfolio has the most value will be announced in The Barron’s Daily newsletter.
Are you ready to compete? Join the challenge and pick your stocks here.
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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner