John Deo

JPMorgan Warns of Key Differences Between Trump’s First and Second Term Market Setups

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    Posted by John Deo Feb 11 - Filed in General - #financialmodelingprep  - 7 views

    As investors anticipate a broadening in equity market participation under President Donald Trump’s second term, JPMorgan strategists caution that the macroeconomic backdrop is significantly different from 2017.

    1. Different Growth Dynamics in 2025

    \ud83d\udccc In 2017, global synchronized growth boosted emerging markets (EMs), the eurozone, and Japan, leading them to outperform the S&P 500 in dollar terms.
    \ud83d\udccc The key driver back then was China’s 2016 stimulus, which fueled global economic expansion.
    \ud83d\udccc Today’s landscape is different:

    • The eurozone is no longer outgrowing the U.S., limiting its relative performance.
    • China’s economic recovery remains uncertain, with lingering real estate and debt concerns.

    \ud83d\udd39 Market Impact:

    • A weaker global growth outlook may keep U.S. equities in the lead.
    • Investors should monitor regional growth trends before making international allocation decisions.

    2. U.S. Dollar’s Trajectory May Differ from 2017

    \ud83d\udccc In Trump’s first term, growth convergence between the U.S. and other economies weakened the dollar, benefiting commodities, EM stocks, and international equities.
    \ud83d\udccc JPMorgan strategists question whether the USD will follow the same pattern this time.
    \ud83d\udccc Trade risks & higher U.S. interest rates could support a stronger dollar in 2025.

    \ud83d\udd39 Market Impact:

    • A stronger dollar could pressure commodities & emerging markets.
    • Currency-sensitive U.S. sectors (e.g., technology & multinational companies) could face headwinds.

    \ud83d\udcca Track forex trends & global market shifts:

    3. Trade Uncertainty & Tariff Risks

    \ud83d\udccc Unlike 2017, trade tensions are already present in Trump’s second term.
    \ud83d\udccc 2018 tariffs disrupted markets, causing a stronger dollar & sector shifts.
    \ud83d\udccc Now, potential tariffs on China & Europe could lead to:

    • Supply chain disruptions
    • Higher inflation risks
    • Sectoral rotation in equity markets

    \ud83d\udd39 Market Impact:

    • Industrials & domestic-focused sectors may outperform amid protectionist policies.
    • Export-heavy industries (e.g., tech & consumer goods) could face headwinds.

    \ud83d\udcca Track tariff impacts with historical data:

    4. Higher Bond Yields Could Reshape Market Leadership

    \ud83d\udccc In 2017, bond yields started at 1.8%, allowing room for the reflation trade to drive equities higher.
    \ud83d\udccc Today, yields are significantly higher, with larger fiscal deficits adding to inflation risks.
    \ud83d\udccc JPMorgan warns that renewed yield spikes could weigh on stocks.

    \ud83d\udd39 Market Impact:

    • High-growth stocks (Tech) could be vulnerable to rising yields.
    • Value & dividend stocks may hold up better in a high-rate environment.

    5. U.S. Tech Leadership in Question

    \ud83d\udccc JPMorgan sees "fading U.S. exceptionalism" in Tech, downgrading Growth stocks from Overweight to Neutral.
    \ud83d\udccc Key Concerns:

    • The Magnificent 7’s valuations are stretched.
    • Historically, incumbents don’t always benefit from tech disruption—new players may take the lead.
    • Shift from Semiconductors to Software may offer better risk-reward in 2025.

    \ud83d\udd39 Market Impact:

    • Investors may rotate away from mega-cap Tech into more diversified plays.
    • Equal-weighted S&P 500 (instead of market-cap weighted) could outperform if leadership broadens.

    Final Thoughts

    \ud83d\udccc While Trump’s first term saw broad equity participation, 2025’s macro backdrop is different.
    \ud83d\udccc Investors should watch trade risks, interest rates, and USD trends before making allocation decisions.

    \ud83d\udd39 Key Takeaways:
    \u2705 Stronger dollar → Headwinds for EMs & commodities
    \u2705 Trade risks → Uncertainty for exporters
    \u2705 Higher bond yields → Pressure on growth stocks
    \u2705 Tech leadership may shift → Look beyond the Magnificent 7