Trump ramps up stimulus expectations ahead of midterm elections, Wall Street bets on cyclical stocks strengthening

BlockBeats News, January 13 — As the US midterm elections approach, Wall Street is interpreting a series of recent economic statements by Trump as a “broad signal to promote growth,” betting that he will fully stimulate the economy and consumption before November, thereby benefiting cyclical assets.

Market participants point out that from continuous calls for interest rate cuts to proposals to limit credit card interest rate caps, the core goal of the Trump administration is to maintain economic activity and affordability of living. Investment banks generally believe that this policy orientation favors cyclical sectors such as industry, raw materials, and non-essential consumer goods, rather than defensive stocks.

Raymond James stated in its latest report that, against the backdrop of strong monetary and fiscal policy expectations and Trump’s frequent signals to promote growth, the market finds it difficult to bet against a cyclical economic recovery. UBS also noted that related policies are more election-driven, with voters primarily concerned about prices, housing, gasoline, and interest rates.

Although Trump’s proposal to cap credit card interest rates once suppressed bank stocks, UBS believes that even if the policy is implemented, it may be temporary and limited in scope. The long-term impact on the financial sector is manageable, and the pullback in bank stocks is seen as a buying opportunity. JPMorgan also remains optimistic about cyclical stocks, expecting that easing inflation will create room for further economic stimulation in 2026, driving cyclical sectors to outperform the broader market.

However, from an index perspective, the S&P 500 is approaching the 7000-point mark. Historical experience shows that before breaking through important integer levels, the market often experiences volatility and adjustments. BTIG pointed out that in the past five attempts to breach the thousand-point mark, four have resulted in phased corrections.

Overall, in the short term, market sentiment may fluctuate due to policy uncertainties and earnings season, but most institutions still believe that, supported by growth expectations and improved corporate profits, cyclical stocks are likely to become a key theme in this round of market rally.