Wall Street stumbled on Trump’s legal immunity challenges

·         Also, less dovish Fed talks dragged the US stock market, which is now trading above the 30 PE bubble valuation zone against fair PE 22-20

·         Fed is now indicating a pause in December to assess Trump’s bellicose & unpredictable policies and core disinflation trajectory

·         Gold also slid as Iran didn’t try to launch another attack on Israel, and also denied any plan to ‘assassinate’ Trump

Wall Street futures surged to a fresh life time high in the last few days since the US election and Fed meeting last week. Stimulus-addicted Wall Street was boosted by hopes & hopes of Trump’s fiscal stimulus (tax cuts and banking deregulation) and also the Fed’s monetary stimulus (rate cuts and QT end and then QE again by the next few years on next global financial crisis). Blue-Chip MNC heavy Dow Jones Industrial Average, the barometer of the US economy scaled (DJ-30 future) almost 44600, tech-heavy NQ-100 (Nasdaq) Future scaled almost 21300 and broader SPX-500 Future around 6050.

Trump's fiscal and infrastructure stimulus plan for his 2024 election campaign largely focuses on reviving the U.S. economy through deregulation, tax cuts, and large-scale infrastructure projects:

Infra Investments:

·         $2 Trillion Infrastructure Plan: Trump has proposed a bold infrastructure plan aimed at revitalizing America's aging infrastructure, which he describes as a critical need

·         Highway and Infrastructure Revamp: Trump has emphasized a renewed focus on American infrastructure, aiming to improve highways, bridges, airports, and rail systems

·         Energy Infrastructure: His plan includes boosting energy (fossil fuel) infrastructure, particularly pipelines, drilling projects (fracking), and coal plants. He sees energy independence as vital for the economy and national security; the US is now the world’s largest producer of oil and natural gas

·         Rural Development: Plans for rural broadband expansion are included, which aim to increase internet access in underserved areas, improve connectivity for agriculture, and promote small-town economic growth; Trump may now favor Musk’s satellite broadband system instead of traditional wired broadband, which is more costly

Trump’s Funding Sources and Fiscal Approach:

·         Public-Private Partnerships (PPPs): Trump has indicated that many of these infrastructure projects would be funded via PPPs, blending private investment with government support (like in India)

·         Streamlining Permitting (deregulation): His plan calls for cutting red tape and reducing the regulatory burden to accelerate construction timelines and lower costs.

·         Federal Funding with State Contributions: Trump’s campaign team has suggested Federal funding support, requiring state and local governments to match some funding, to encourage buy-in and accountability

·         Investing $200 billion in federal funds to stimulate at least $1.5 trillion in total infrastructure investments through partnerships with state and local governments

·         Focusing on rural infrastructure, with an additional $50 billion earmarked for rural areas

·         Increase Local Authority: Empower state and local authorities in investment and permitting decisions.

·         Empower American Workers: Reform education and workforce skill programs to prepare workers for in-demand jobs

Fiscal Policy and Economic Stimulus:

·         Corporate and Individual Tax Cuts: Trump proposes further tax cuts to stimulate business growth and consumer spending. He suggests reducing corporate tax rates and exploring further middle-class tax cuts to increase disposable income.

·         Tax Cuts and Extensions: Trump's campaign plans to extend the provisions of the 2017 Tax Cuts and Jobs Act (TCJA), which are set to expire by December’25

·         More tax cuts: Reducing the corporate tax rate to 15% from current 21%

·         Eliminating Federal taxes on Social Security benefits and overtime pay

·         Restoring deductions for state and local taxes (SALT) that were capped under the TCJA

·         Supply-Side Economics: Trump is championing a supply-side approach to the economy, betting on deregulation and lower taxes to drive investment and job creation

·         Deregulation: Trump has pledged to roll back environmental and business regulations, arguing that this will reduce costs for companies and encourage domestic production, especially in energy and manufacturing

·         Streamlining permitting processes to expedite project initiation, aiming for completion within two years

Focus on "Made in America"

·         Onshoring Incentives: Trump’s stimulus plan emphasizes reshoring manufacturing to the U.S., with proposed tax breaks and incentives for companies that bring manufacturing jobs back or invest domestically

·         Hawkish Trade Policies: Trump’s plan includes additional tariffs and hawkish trade policies to discourage reliance on imports and encourage domestic production. Trump has highlighted China and global supply chains as key areas for restriction to strengthen American manufacturing.

·         Trump Tariffs: The plan includes tighter trade policies, with potential tariffs on imports from specific countries to boost domestic production and reduce reliance on foreign supply chains, especially in critical industries; Trump may be planning general additional tariffs of at least 10% on all imports and as a ‘special case’ 60% on China (?)

·         Although, Trump’s policy is intended to protect American industries but may also lead to increased costs for US consumers and potential retaliatory actions from trading partners like China

Trump’s immigration Policy:

·         Trump has reiterated his stance on immigration, advocating for stricter controls and mass deportations of undocumented illegal and criminal immigrants. However, critics pointed out that such policies could reduce the labor supply, potentially driving up costs for businesses and impacting economic growth negatively.

Trump’s approach overall prioritizes economic growth through tax relief, infrastructure investment, deregulation, and a reorientation of trade policies to reduce dependence on foreign production. This plan is targeted at job creation, GDP growth, and increasing America’s competitive edge globally. The infrastructure investments are expected to create jobs and stimulate economic growth. Estimates suggest that such spending could increase GDP significantly, providing immediate boosts during the economic downturn. The plan aims not only to rebuild physical structures but also to enhance long-term productivity across various sectors to compete with mighty China.

Trump's fiscal and infrastructure stimulus plan as a part of the 2024 election reflects a continuation of his previous policies with an emphasis on tax cuts, significant infrastructure spending, and protectionist trade measures. While these proposals aim to stimulate economic growth and job creation, they also raise concerns about increasing national debt and potential economic repercussions from trade tariffs.

Overall, Trump’s policies, if implemented at face value, may add more debt for the US than the present trend and also boost inflation due to higher tariffs and lower labor supply amid hawkish immigration policies; this may make the Fed’s job to meet price stability and maximum employment more difficult than now.

Tesla also soared to a year high on hopes of a favorable regulatory environment for EVs, private space and social media (free speech). Tesla/Twitter/Space-X CEO Musk played an active and influential role in Trump’s 2nd election win and an incredible political comeback. Trump’s approval rate soared to almost 54% from around 34% earlier (after subdued election debate performance with Harris). Trump’s cheerleader Musk played an active funding and influential role in Trump’s unprecedented come back to the White House even after a gap of 4-years from the 1st term; Trump is the 2nd US President in US history to achieve such ‘distinction’ and too with a record percentage and almost at trifecta.

Trump (Republicans) have a workable/comfortable majority in the US Senate, at least till the next mid-term election in Nov’26.

But Trump (Republicans) is yet to win the controlling majority in the US House; just short of only three seats, but is expected to get the controlling majority of 218 seats as results are still pending in some constituencies.

Overall, Trump is expected to get the Trifecta (White House, Senate, and House), at least till the next US mid-term election (November 26) and he has virtually two years’ time frame to implement his policies and election promises because he usually due to anti-incumbent wave/wind for 1st two years under most of the US Presidents result in loss of Trifecta after the next mid-term election two years later. Overall, holding a trifecta into and beyond a first midterm is uncommon, given the natural checks and balances of the U.S. political system. The US midterm elections tend to favor the opposition, often as a response to policies enacted during the president’s first two years (anti-incumbent wave); thus all US Presidents tend to be a ‘Global President’ through cold/proxy war with ‘enemy countries’ like Russia, China and North Korea.

But Trump is somewhat different and tends to keep healthy relations with Russia, North Korea and even China in terms of any military conflict, while on issues of trade, ‘nationalistic’ Trump is always ready to wage a ‘trade war’ with not only against China and other friendly South Asian and South American exporters like Japan, South Korea, Vietnam, Mexico, Brazil and even Germany, other EU/European exporters and even India. As per Trump’s narrative, the EU is a ‘mini version’ of China, even worse than China in terms of trade and the US has no obligation to ‘save’ EU/Europe from ‘Russia’s nukes’ without adequate ‘fees’ (as a contributing member of NATO).

The market is now expecting that because of his business interest, Musk may ensure moderate Trump trade war tantrum 2.0. Musk has reportedly been in touch with Putin since the 2022 Ukraine war and the Star satellite internet broadband saga (in Ukraine). Thus Putin may be coordinating with both Musk and China’s Xi to have a friendly trade war and stop helping Ukraine to ensure a speedy ceasefire. Trump may also ensure no NATO expansion around Russian border states/countries like Ukraine, which is one of the main factors for the Russia-Ukraine war. Russia/Putin wants large barren land between Russia and Ukraine as a buffer safe zone for any potential NATO aggression.

On Tuesday, Wall Street Futures stumbled from around life time high after the US New York (NY) Supreme Court postponed its decision to 19th November’24 on whether to toss President-elect Donald Trump's conviction in his hush-money case after the Supreme Court of the United States (SCOTUS) in July ruled that Trump "is entitled to at least presumptive immunity from prosecution for all his official acts”. Meanwhile, Trump's attorney pointed out to the NY SC that "the stays, and dismissal, are necessary to avoid unconstitutional impediments to President Trump’s ability to govern”. It may be worth noting that New York is the only state in the US where the US Supreme Court (SCOTUS) is not the state's court of last resort (which would be the New York Court of Appeals). The recent developments in Trump's legal battles, particularly the postponement of his New York ‘hush money’ case, have significant implications for both his presidency and the broader legal landscape.

Postponement of Trump’s case Proceedings:

On 12th November’24, a New York SC Judge granted a stay on all actions in Trump's case until November 19. This decision allows both the prosecution and Trump's defense team to assess the implications of Trump's recent election victory as he prepares to assume office as the 47th President of the US on 20th January’25. The stay was prompted by a joint request from both parties, highlighting the "unprecedented circumstances" surrounding Trump's election and the need to balance the jury's verdict with his presidential duties.

Dismissal of Charges:

Should the judge accept Trump's arguments regarding presidential immunity, it could set a precedent affecting how future cases involving former presidents are handled, potentially limiting accountability for actions taken while in office.

Broader Implications for Trump's Presidency and his various legal challenges:

The outcome of this case may influence Trump's ability to govern effectively. If he faces sentencing while in office, it could complicate his presidential responsibilities and create significant political ramifications and a constitutional crisis. Legal experts suggest that imposing a sentence during a presidential term presents unique challenges, raising questions about how such proceedings would unfold without disrupting governmental functions. But if Trump successfully navigates these legal challenges, it might bolster his political standing among supporters who view him as a victim of political persecution (vendetta politics by Biden admin), while maintaining a felony conviction could impact public perception and his administration's legitimacy.

The interplay between Trump's legal challenges and his presidency represents an unprecedented scenario/constitutional crisis in the US. As the NY SC Judge prepares to rule on key aspects of the case, the ramifications will extend beyond legal consequences, potentially reshaping the dynamics of governance and accountability for elected officials in the US. Trump's potential presidency is significantly intertwined with the outcomes of various legal cases against him, particularly in light of recent US Supreme Court (SCOTUS) rulings regarding presidential immunity.

Legal Context

·         Supreme Court Ruling: In July 2024, the U.S. Supreme Court ruled that former presidents have absolute immunity from criminal prosecution for actions taken within their exclusive constitutional authority while in office. This ruling has broad implications for Trump's ongoing legal challenges, including cases related to election interference and the mishandling of classified documents while in office (White House) during 1st term.

·         In a landmark 6-3 decision, the US Supreme Court (SCOTUS) ruled that former presidents, including Trump, are entitled to absolute immunity from criminal prosecution for actions taken within their constitutional authority during their presidency. This includes a presumption of immunity for all official acts, although the court clarified that there is no immunity for unofficial acts.

·         The SCOTUS ruling allows Trump to argue that many of his actions—specifically those related to the unprecedented 5th January’21 Capitol Hill riots and efforts to overturn the 2020 election—were official acts, potentially shielding him from prosecution. The case has been remanded to lower courts to determine which actions qualify as official.

·         Implications of Winning the Election: As Trump wins the 2024 presidential election, legal experts suggest that he could potentially use his position to dismiss or undermine ongoing criminal cases against him. Winning the presidency may serve as a "get out of jail free card," allowing him to halt federal prosecutions due to a long-standing Department of Justice (DOJ) policy that restricts prosecuting sitting presidents.

·         Obstruction and Interference Cases: Trump’s potential claims of immunity in cases involving obstruction or election interference have yet to be firmly resolved. In Georgia, for instance, the charges relate to efforts to overturn the 2020 election, actions not officially part of presidential duties. Trump’s legal team argues that his actions were intended to ensure election integrity, but proving that might be complex.

·         Public Opinion and Political Ramifications: While Trump does not have legal immunity, he has argued that the prosecutions are politically motivated, a claim that may resonate with some voters. As Trump is re-elected, he would have some degree of influence over the DOJ, potentially impacting federal cases, though state cases would remain outside federal jurisdiction; but as a last effort, Biden may pressure Trump to make an unofficial deal for his son Hunter not to have immense legal hurdles in future.

·         Dissenting Opinions: Justices Sonia Sotomayor and others dissented, arguing that this ruling undermines the principle that no one is above the law and sets a dangerous precedent by allowing presidents to engage in criminal conduct under the disguise of official duties

·         Legal Precedents: Courts have ruled that presidents are immune from civil lawsuits for official actions but not for private conduct unrelated to official duties. Cases alleging misconduct, like in the January 6th Capitol riot case, challenge whether actions that could be considered political or campaign-related can fall under presidential immunity.

·         Current Cases Against Trump: Trump faces multiple serious charges, including

·         Election Interference: Allegations of attempting to overturn the 2020 election results

·         Classified Documents Case: Charges related to the retention of classified materials post-presidency after he lost to Biden in Novenber’20 election

·         State-Level Charges: In Georgia, Trump is also charged with attempting to illegally overturn election results

But as Trump secured re-election, many of his criminal cases would likely be dismissed or stalled indefinitely. Legal analysts believe that prosecutors would struggle to proceed against a sitting president, and any ongoing cases might be effectively quashed as he could leverage executive power to halt legal actions. And if Trump lost the election, he would likely face significant legal challenges as he would no longer enjoy presidential immunity.

The ongoing legal saga surrounding Trump's hush money case has recently taken significant turns following his election victory. The "hush money" case involving Trump, often referred to as the "Stormy Daniels case," centers on allegations that Trump directed payments from an election campaign fund to adult film actress Stormy Daniels (real name Stephanie Clifford) and former Playboy model Karen McDougal in 2016. The payments were allegedly made to keep them from publicly discussing past affairs with Trump during his 2016 presidential campaign. Trump has denied the affairs, but the legal case focuses on how these payments were made and recorded.

In 2023, the Manhattan District Attorney’s office filed charges against Trump, marking the first time a former U.S. president faced criminal charges. The case alleges that Trump, through his then-lawyer Cohen, arranged a $130,000 payment to Daniels just before the 2016 election. These payments were later reimbursed to Cohen by the Trump Organization and classified as legal expenses, which raised questions about campaign finance violations and financial record falsification. Cohen pleaded guilty in 2018 to related charges, admitting he facilitated the payment at Trump’s direction to influence the election.

Trump's legal team has argued that the payments were private transactions intended to prevent personal embarrassment rather than influence the election. As of now, Trump has pleaded not guilty to all charges. His defense contends that the prosecution is politically motivated and without sufficient grounds. The trial, which has generated intense media coverage, raises significant legal questions about the boundaries of campaign finance laws and financial record-keeping standards, especially concerning political figures. The outcome could have substantial implications for Trump, both legally and in terms of his public image. There is another theory that Trump may have been compromised by Russian President Putin (KGB) in a honey trap case in Moscow back in 1987. Thus Trump maintains a less hawkish relationship with Russia/Putin contrary to Biden and Putin has also valid interest in Trump 2.0 for a normal relationship with the US and end of the Ukraine war in his favor.

Bottom line:

Politicians and top political leaders generally do not hit each other below the belt; in this instance case, Trump may be granted legal immunity from all his pending/settled cases, and as last ditch effort, Biden may ensure no reciprocal action against him or his son Hunter by Trump in his 2nd term; and Trump may be granted legal immunity soon.

Market Impact:

On Tuesday, Wall Street Futures stumbled from a record high on the concern about Trump’s legal challenges and less dovish Fed talks; Fed may pause in December’24 if US core disinflation remains stalled/muted. Among techs, Tesla nosedived followed by other megacaps. The market is now also worried about bubble valuation as at around $196 TTM EPS for Q2CY24 AND 6000 level of SPX-500, the TTM PE is over 30 bubble zone against 22 fair PE and 10-15% expected earnings (EPS) growths in the coming days.

Weekly-Technical trading levels: DJ-30, NQ-100, SPX-500, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 44000) now has to sustain over 44800 for any further rally to 45000/45200-45500/46000 in the coming days; otherwise sustaining below 44750-44650, DJ-30 may again fall to 43900/43300-42600/41600 in the coming days.

Similarly, NQ-100 Future (21150) has to sustain over 21500 for a further rally to 21700/21900-22050/22500 and even 23000 levels in the coming days; otherwise, sustaining below 21450-21350, NQ-100 may again fall to 20950/20850-20500/20300 and 20000/19800-19650/19350 in the coming days.

Technically, SPX-500 (CMP: 6000), now has to sustain over 6100 for any further rally to 6150/6200-6350/6500 in the coming days; otherwise, sustaining below 6075/6050, may again fall to 6000/5950-5900/5850 and 5675/5600-5550/5500 in the coming days.

Also, technically Gold (CMP: 2600) has to sustain over 2590-2575 for a recovery to 2635/2675-2700/2715 and further 2725/2750-2775/2795 in the coming days; otherwise sustaining below 2575, Gold may further fall to 2540/2500-2470/2450 in the coming days (depending upon Fed rate cuts,  Gaza/Ukraine war trajectory).