Is the Trump Trade Back?

A trade makes a comeback

The election polls may be deadlocked. But in the markets, some investors are indicating that they see Donald Trump as increasingly likely to win the White House, a belief that seems to mirror a swing in the prediction markets.

Market observers see the return of the so-called Trump trade, which posits that certain industry sectors and financial assets — think oil drillers and cryptocurrencies — would benefit from the former president bringing in lower taxes and less regulation.

The signs that the Trump trade is gaining steam: Stanley Druckenmiller, the billionaire financier, told Bloomberg yesterday that over the past 12 days, markets appeared “very convinced Trump is going to win.” (It’s worth noting that Druckenmiller said he didn’t plan to vote for either candidate.)

Among the evidence Druckenmiller pointed to:

• A rally in bank stocks, which are up 8.5 percent over the past two weeks. (That said, banks have so far reported better-than-expected earnings.)

• Shares in Trump Media & Technology Group, the former president’s unprofitable social media company, have soared since late September, adding nearly $2 billion to its market value. But the stock’s volatile trading hasn’t always correlated with polls or prediction markets, and it’s unclear whether the company would draw more advertisers if Trump won. Some companies might flock to the platform to curry political favor; others might stay away.

• Bitcoin has risen about 13 percent in the past week. The cryptocurrency world has largely bet on a second Trump administration being friendlier to digital assets, though Vice President Kamala Harris has made appeals to the industry.

Also, the dollar approached a two-and-a-half month high this morning as currency traders appear to be pricing in a Trump victory, betting that his economic policies would drive up inflation, lower the price of bonds and strengthen the dollar. (That said, Trump wants a weak greenback.)

But there are potential pitfalls to betting on Trump. “It is a thing in the financial markets,” Holger Schmieding, the chief economist at Berenberg, a German bank, said of the Trump trade.

He told DealBook: “I don’t agree with it in the long run. Higher tariffs and less immigration would hurt U.S. vitality.”