Source: Caixin.
Ralph Schlosstein, honorary chairman of the well-known investment bank Evercore ISI, has issued a warning that Donald Trump, if re-elected and returned to the White House, will bring risks to the US stock market.
He pointed out that Trump's tariff proposals, including a comprehensive 10% tariff on imported goods from other countries, will damage the stock market because these tariffs may accelerate inflation.
He served as President and CEO of Evercore for more than 11 years. Prior to joining Evercore, Schlosstein co-founded BlackRock with others and served as a director of BlackRock since the company's IPO in 1999, Chairman of the BlackRock Management Committee, and a member of the Executive and Investment Committees.
Currently, most analysts believe that Trump's policies, such as increasing tariffs, reducing taxes, and reducing immigration, could reignite inflation. A survey of economists conducted by the media earlier this month found that 56% of respondents believed that if Trump was re-elected, inflation levels would be higher than those during Biden's tenure, while 16% held the opposite view, and the rest of the economists believed there would be no difference.
Michael Metcalfe, global macro strategy director at Fulcrum Asset Management, had previously warned that "Trump's policies were at greater risk of causing inflation in his second term than in his first term."
"Tariffs will exacerbate the risk of global trade wars, which is clearly not in the interests of global growth or the market." Schlosstein said in an interview.
"Of the policies of the two candidates, this is the most unfavorable for the market." he added.
On the other hand, Trump's trade has boosted bond yields. For Schlosstein, this means that returns will be discounted at higher interest rates, leading to lower stock prices. The co-founder of BlackRock said that although the Fed is unlikely to directly raise interest rates in response to Trump's tariffs, the possibility of raising interest rates cannot be ruled out if inflation soars.
"This will be another blow to the stock market." he said.
Meanwhile, both parties largely ignore the impact of immigration. Schlosstein said that if Trump expels these people, "it will have a very bad impact on economic growth" because labor and productivity (improvement) have helped the US economy outstrip Europe and Japan.
More importantly, the expanding budget deficit and how the United States will address this issue.
"Our fiscal policy is unsustainable," Schlosstein said. "At present, neither party seems to be paying particular attention to solving this problem. Trump's policies, especially tax reduction policies, will push up the deficit."
He pointed out that in 2011, S&P Global downgraded the US credit rating, putting pressure on the financial markets. A global trade war or a weaker US dollar could lead to foreign investors withdrawing from US Treasury bonds, which could trigger another downgrade.
However, overall, Schlosstein believes that the possibility of a recession next year is unlikely. As long as the economy and corporate profitability are good, the US stock market will continue to rise, and the Fed's first rate cut will boost the stock market. "Ultimately, what drives the market are economic fundamentals and corporate financial statements, not who is president," he said.
"In the end, what will drive the market are the economic fundamentals and corporate financial reports, not who is president," he said.
Editor / jayden