The GOP may be feuding over whether to embrace Donald Trump, but some on Wall Street appear to be warming to the presumptive Republican nominee. And they have a message for markets: A Trump presidency could be a catalyst for big gains. Their remarks were a departure from a separate group of investors, who weeks ago panned a potential Trump administration.
It's a long way until the November election, and a victory by the real estate mogul is far from assured. The Real Clear Politics average of general election polls shows Trump trailing presumptive Democratic nominee Hillary Clinton, as well as challenger Bernie Sanders by a wide margin. That said, some Wall Street bulls are envisioning how a Trump win might be beneficial for stocks.
"A Trump presidency could add up to a positive for equities," Tom Lee, Fundstrat Global Advisors founder, told CNBC's"Fast Money" in an interview. Lee argued that Trump won't tolerate currency manipulation, that he'll be savvy when it comes to fiscal policy, and that he will establish a pro-business environment.
"I think Trump's approach to trade could reduce fears among business that their profits will be heavily taxed. Based on this, I think he could surprise to the upside for equities," Lee added.
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Trump explained on CNBC's "Squawk Box" this week that the U.S. has to renegotiate its trade deals, and called them "disastrous. We used people who are political hacks to make deals with China, to make deals with Japan and to make deals with Mexico."
The Trans-Pacific Partnership was championed by President Obama before being signed by 12 nations, including Japan and Mexico, with the goal of promoting global trade through the elimination of trade tariffs. Trump has called the agreement an attack on American businesses, arguing it doesn't do anything to address currency manipulation and would allow foreign competitors to dump cheaply-priced goods in U.S. markets, at a cost to American businesses.
'Good relationships with Wall Street, politicians'
Oppenheimer's John Stoltzfus doesn't foresee a hindrance on stocks in the event of a Trump presidency. Accordingly, he has urged investors to avoid sitting on the sidelines this month, as his firm expects S&P 500 earnings to grow around 8 percent this year.
"Markets always worry when uncertainty is a factor, and it is unclear which policies Trump would execute if elected," said Stoltzfus. "However, I'd expect him to enact policies that reflect his ability to successfully negotiate with people. He relies on good relationships with politicians and Wall Street, and I don't expect that to change."
In the near-term, Stoltzfus expects bond yields to continue a process of normalization, while worries surrounding China continue to subside. He believes that these factors, combined with long-term low oil prices, will help drive stocks higher.
A sign of things to come?
The positive market effects from a theoretical Trump presidency are hinted at by recent findings from Kensho. Based on the performance one week after each of Trump's 10 primary victories since February, Kensho found that numerous exchange traded funds (ETF's) and all the major U.S. indices delivered positive returns. For instance, the materials sector ETF, the XLB, saw an average of 1.56 percent positive returns. Other ETF's that are composed of cyclicals that saw positive average returns included financials, consumer discretionary and technology.
In U.S. markets, the Russell 2000, the S&P 500, the Dow Jones Industrial Average and the Nasdaq were also positive, on average, across each of the 10 weeks that followed Trump's primary wins. The leader was the Russell 2000, which saw positive returns of 1.4 percent.
This week, the CNBC All-America Survey presented more positive news for Trump: The data found that both Clinton and Trump are viewed evenly on their understanding of key economic issues. However, when it came to voters who were dissatisfied or angry with the economic system, 27 percent favored Trump's views, versus 19 percent who favored Clinton.
On the flip side, one analyst insisted that the next American president will not have a significant impact on the macro outlook for stocks—regardless of whether it was Clinton or Trump.
"The most power person in the world is already a women and her name is Janet Yellen," said Tony Dwyer, chief market strategist for Canaccord Genuity. The market has bigger issues to grapple with, such as the Federal Reserve, oil prices, and geopolitical uncertainty, Dwyer said, adding that he was fundamentally bullish on equities.
"Based on the macro-economics, we see the S&P gaining 15 to 20 percent in the next 12 months," Dwyer said. "It doesn't matter who the president will be."
