It has become increasingly likely that Donald Trump will be the Republican candidate in the presidential election in the fall and that there will be a repeat of the 2020 duel: Joe Biden against Donald Trump. Economists at Commerzbank analyze how a Trump victory could impact stock markets. 

Another stock market rally?

In November 2016, the stock markets reacted positively to Donald Trump's election victory, as the new US president promised companies lower taxes and less regulation, among other things. However, a number of factors suggest that the stock markets would not welcome a Trump election winner with similar euphoria. 

For example, share valuations in 2024 are significantly higher than in 2016, when investors paid a price/earnings ratio (P/E ratio) of 17 for the S&P 500 and 18 for the Nasdaq 100, while the current S&P 500 P/E ratio is 20 and the Nasdaq 100 P/E ratio is 25. 

In addition, there was a high level of uncertainty and nervousness in the stock market in 2016 in the run-up to the presidential election, and the implied volatility VIX for the S&P 500 was regularly above 20. We see the current VIX level of 13 as a signal that many investors are quite carefree about Trump winning the election in 2024. 

We expect that a possible Trump election victory in 2024 will not have as strong an impact on the stock markets as in 2016.