Trump, JD Vance and stock market momentum: Here’s why

Former President Trump officially won the GOP nomination with his vice presidential pick, Sen. JD Vance, in tow. 

The Republican senator from Ohio, a former Marine, private equity alum and author of a bestseller-turned-Netflix special, received the nod on Monday, two days after the former president narrowly escaped an assassination attempt during a rally in Pennsylvania. 

"Prior to this horrific event, the markets were already sniffing out, subsequent to the debate, a Trump victory. Now, investors are sniffing out a what? A 'red sweep,'" said Jason Katz, UBS managing director and senior portfolio manager, on "Varney & Co.," predicting what could unfold should the GOP ticket win the White House. "The tax laws of 2017 become permanent, maybe you get additional tax cuts. You will have much less erroneous regulations; we could see a very big pickup in M&A activity," he detailed. 

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The Dow Jones Industrial Average closed firmly above 40,000 on Monday, a new record high, up 6.7% this year, with the S&P 500 just shy of its all-time high, up 18% this year. The tech-heavy Nasdaq Composite has gained 23%, closing just below its record high reached this month.

With the Republican National Convention underway, investors will be listening for details on whether the GOP’s policy platform can keep the momentum for equities going. 

LIVE UPDATES FROM THE RNC

At a recent "How will the Election Impact the Markets?" Ameriprise virtual roundtable in late June, attended by FOX Business, Anthony Saglimbene, chief market strategist at Ameriprise Financial, said investors may be subject to more volatility through November.

"As the markets start to discount not only who sits in the White House but where control of Congress lies, that could create a period of volatility. But what we generally see historically is that no matter how the results shake out, volatility ebbs back to more normalized levels post-election day," he noted, and then investors turn back to fundamentals. "The level of interest rates, growth and corporate profits, and obviously the trajectory for monetary policy, these are the four things that generally drive the markets," he said. 

The team was not available to comment on whether there will be any market or election impact after the assassination attempt on Trump over the weekend. 

FED DOESN'T NEED TO WAIT ON RATE CUTS

Outside the upcoming election, tailwinds for the economy are emerging. On Monday, Federal Reserve Chair Jerome Powell said policymakers are seeing positive inflation data and don’t necessarily need to sit idle for inflation to hit their preferred target rate. 

"The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long because the tightening that you’re doing, or the level of tightness that you have, is still having effects, which will probably drive inflation below 2%," Powell told attendees at the Economic Club of Washington, D.C.

The consumer price index fell 0.1% in June vs. May, the first monthly drop since May 2020. Still, year-over-year prices remain elevated at 3%.

Currently, 89% of market participants are pricing in a September rate cut, according to the CME’s FedWatch Tool, which gauges rate moves. No action is predicted at the July meeting. 

Russell Price, chief economist at Ameriprise, expects one rate cut in September and another in December but says the health of the U.S. consumer is a bigger driver of the economy. 

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"What's really most important is consumers. Consumer spending has eased a little bit. In my mind, consumers are still doing just fine. But they have gone a little bit long in the tooth when it comes to the amount of spending they did on goods a few years ago and more recently on services, particularly on travel and vacations and the like. But generally, consumers, though, are [in] good financial shape," he noted.