A $1 trillion money manager says the Trump Trade is back

Business Insider deputy executive editor Matt Turner speaks to David Hunt, president and CEO of PGIM, checks in on the so-called Trump trade, which he says lost its footing after an initial surge. He notes that the market was boosted in the first two quarters of the year by an improving economy, and says Trump trade “animal spirits” are coming back into the market. Following is a transcript of the video.

Matt Turner:And on the equity side, you said earlier in the year that the stock market had maybe gotten ahead of itself in terms of betting on the success of various administration policies that might give the economy a boost. Where are we now? Obviously, a lot has changed since last summer. It seems like things are changing every day. Where are we now?

David Hunt:So, it’s a very interesting thing in terms of the market sentiment. At the beginning of the year, there was without a doubt the famous Trump trade that came on, which was a belief in tax cuts, infrastructure, and deregulation as a package driving growth. We saw over the first quarter and second quarter, that trade really went to zero. I think the basic belief that that would happen diminished a great deal in investors minds. Of course, at the same time, the real economy — sort of in a different, parallel universe from politics — was doing even better, and so real growth rates were picking up and so a general belief that the economy was doing better began to take over market sentiment. And so I would say the market was driven higher by that belief, not really related to the Trump policies. Now in the last two weeks, we’ve started to see that shift again, and I do think that with the at least outline of a tax plan on the table, you’ve begun to see some of the earlier Trump trade animal spirit come back in. But for most of the year, I would say that really hasn’t been a factor in the markets.

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