Can Trump Deliver Enough Policy Wins to Sustain This Equity and Crypto Rally?

Can Trump Sustain the Post-Election Market Rally?

With Trump’s recent election victory, markets have experienced an initial surge, largely driven by investor optimism around his promises for tax cuts, deregulation, and a pro-crypto stance. However, sustaining this rally may prove challenging as markets shift from hopeful speculation to the realities of policy execution. The current surge in U.S. equities and cryptocurrencies like Bitcoin has coincided with a steep decline in gold prices, dropping to two-month lows as the dollar strengthens. What will Trump need to do to keep the market momentum going?

How Can Trump Push Through Promised Tax Cuts?

One of Trump’s central promises is to extend the 2017 tax cuts, which experts estimate would add $4.6 trillion to the national deficit over the next decade. While his supporters may expect sweeping tax cuts for both businesses and individuals, Trump will need to address concerns within his own party about the deficit implications. Traditional conservatives may resist a debt-financed approach to tax relief, pushing instead for measures to offset the costs, possibly through trade tariffs or spending cuts. This friction could create delays or compel Trump to prioritize specific cuts, such as those for individual taxpayers over corporate benefits, in order to secure enough GOP support.

Will Deregulation Efforts Meet Business and Crypto Sector Expectations?

Deregulation is another key area where Trump has made bold promises. From easing constraints on businesses to promoting U.S.-based Bitcoin mining, Trump’s pledges cater to both traditional industries and the growing cryptocurrency sector. However, rolling back existing regulations could face significant legal and bureaucratic hurdles, especially within independent agencies like the SEC. For instance, Trump has vowed to remove SEC Chair Gary Gensler, a figure seen as a barrier to crypto-friendly policies. Yet, Trump lacks the direct authority to unseat Gensler. The administration’s ability to provide the regulatory relief that investors anticipate may thus be slower and more limited than hoped.

Can the Administration Manage Rising Debt While Keeping Market Confidence?

As tax cuts and potential tariffs strain government revenue, the deficit looms as a crucial issue. High national debt has already led to rising bond yields, even with recent rate cuts by the Federal Reserve. While Trump has proposed tariffs as a revenue source, these alone may fall short of balancing the deficit, especially as they could increase costs for consumers and create headwinds for economic growth. If bond markets continue to signal concerns over rising debt, the administration may struggle to reassure investors and maintain confidence in both equities and the dollar.

Will Central Bank and Investor Demand Stabilize Gold Prices?

Gold, often considered a safe-haven asset, has fallen sharply post-election as investor attention shifts to equities and crypto. However, economic uncertainty and potential inflationary pressures from Trump’s policies could eventually revive demand for gold as a hedge. Central bank purchases of gold remain robust, and if Trump’s fiscal policies fuel inflation concerns, investors might return to gold, adding pressure to the dollar.

Can the Rally Last?

For Trump, the path to sustaining this rally lies in managing complex political and economic challenges. As hopes fade into the realities of policymaking, the administration will face difficult trade-offs. Achieving all his promises will require compromises, and the strength of the rally may ultimately depend on how effectively Trump can balance investor expectations with fiscal responsibility.