Trump shooting incident boosts election odds, market bets

Saturday's shooting at a rally for former US President Donald Trump in Pennsylvania has heightened his chances of winning the White House, with investors predicting an increase in trades betting on his victory this coming week.

Trump sustained a minor injury after being shot in the ear in what authorities are treating as an assassination attempt. Despite his face being bloodied, Trump pumped his fist moments after the attack, and his campaign confirmed his well-being.

Even before the shooting, markets had responded to the possibility of a Trump presidency by pushing the dollar higher and positioning for a steeper U.S. Treasury yield curve. These trends are expected to strengthen this week, according to Rong Ren Goh, a portfolio manager at Eastspring Investments in Singapore.

This incident marks the first shooting of a U.S. president or major party candidate since the 1981 assassination attempt on President Ronald Reagan, which significantly boosted Reagan's poll numbers. Analysts believe this event could similarly impact Trump's campaign, potentially leading to a decisive victory in the tight race against President Joe Biden.

"From memory, Reagan went up 22 points in the polls after his assassination attempt. The election is likely to be a landslide. This probably reduces uncertainty," said Nick Ferres, chief investment officer at Vantage Point Asset Management.

The shooting has drawn widespread condemnation from world leaders and U.S. politicians. Industry executives, including Tesla's Elon Musk, have also voiced their support for Trump.

Since a lackluster performance in a recent debate with Trump, Biden has faced growing skepticism from donors, supporters, and fellow Democrats about his capability to win and manage the demands of the presidency.

Key voter issues such as immigration and the economy favor Trump, according to Reuters/Ipsos polls, even though Biden’s administration has seen a solid economy with slowing inflation and low unemployment.

Market analysts anticipate that under Trump, there would be a more hawkish trade policy, reduced regulation, and looser climate change policies. Investors also expect an extension of corporate and personal tax cuts expiring next year, raising concerns about increasing budget deficits.

Trump has previously indicated that he would not reappoint Federal Reserve Chair Jerome Powell when his term ends in 2026.

Longer-term Treasury yields have risen alongside the odds of a Trump administration. The gap between 2-year and 30-year notes has narrowed significantly since the Biden-Trump debate.

“Trump has always been more 'pro-market'. The key issue looking forward is whether fiscal policy remains irresponsibly loose and the implication that might have for (renewed) inflation and the future path of interest rates," said Ferres.

Stock prices have surged, with both the S&P 500 and Dow Jones Industrial Average reaching record highs. The S&P 500 is up 18% this year.

"Around the five presidential elections of the last 20 years, CEO confidence, consumer sentiment, and particularly small business optimism have shifted more favorably in response to Republican victories than Democratic victories," analysts at Goldman Sachs wrote.

Improved sentiment could boost earnings outlooks for some firms even without substantial policy changes, they added.

Following the shooting, billionaire hedge fund manager Bill Ackman and Elon Musk both endorsed Trump, highlighting his resilience and market-friendly stance.

(With Reuters inputs)