As the curtains fell on the turbulent 2016 U.S. presidential race, Donald Trump made his way to the White House against all odds. The business mogul turned presidential contender’s victory sent shockwaves across global markets. However, one particular sector underlined a silver lining amidst the initial jitters – Wall Street. Pundits, investors, and financial experts began speculating an upbeat prospective era of deal-making during Trump’s tenure.
Following the shocking verdict of the election, shares of banks and financial firms soared on the New York Stock Exchange. The rallying stocks were deemed a direct consequence of Wall Street’s hopes tied with the Trump presidency. A prospect of deregulation in the financial sector, proposed tax cuts, and much-touted fiscal stimulus to boost economic growth all contributed to the optimistic outlook.
The major expectation surrounding the Trump administration was an unlocking of deal-making on Wall Street. This was primarily due to Trump’s background as a successful businessman known for his skill in negotiating and closing deals. Consequently, the investment banking sector anticipated a potential surge in mergers and acquisitions, corporate restructuring, and other related business transactions.
The assumption for this unlocking of deal-making was also rooted in Trump’s campaign promises. He championed for rolling back parts of the Dodd-Frank Act – a regulation established after the 2008 financial crisis aimed at curbing excessive risk-taking by banks. Trump argued that these regulations were too stringent and stifled financial sector growth. By easing these regulations, Wall Street expected a freer hand in deal-making – leading to increased business opportunities for many firms and investors.
Additionally, Trump’s promised hefty tax cuts were viewed as a possible driver for increased corporate activity. With more disposable income available for businesses, the resources allocated to seek mergers, acquisitions, or other deal-making activities were projected to increase. Similarly, his infrastructure spending plan was perceived to boost the construction and related sectors, resulting in more deal-making opportunities.
Also, speculation about Trump’s approach to international trade agreements like the Trans-Pacific Partnership (TPP) and North American Free Trade Agreement (NAFTA) further hinted at the possibility of new deal-making scenarios on Wall Street. The change in the U.S.’s stance on these agreements could stimulate different sectors of the economy, potentially triggering a wave of new deals to be made.
However, such expectations were not free from challenges. Political unpredictability, policy reversals, trade wars, and resistance to deregulation posed significant hurdles to this optimistic outlook. Additionally, a pronounced shift in geopolitics, linked with the U.S.’s international relations under Trump’s foreign policy, could affect deal-making volatility.
Despite the complexities and potential risks, Wall Street’s expectation for an unlocked deal-making era under the Trump administration was backed by fairly concrete premises. This included the administration’s pro-business stance, the proposed rollback of financial sector regulations, and promises of fiscal stimulus and tax cuts. The interplay of these factors elucidated Wall Street’s anticipations and predicated an era of potential prolific deal-making under the Trump presidency.
