We rolled our eyes when Donald Trump claimed credit for the recent stock market rally. (Republicans would be lambasting Biden if the market were down.)

But it turns out there may be a sliver of truth to the Trump claim that the market is rallying because investors like that he is ahead in the polls. A Trump presidency would mean tax rates are going down, while a Biden victory would mean more regulations and higher tax rates on investment across the board.

Investment guru Scott Bessent, CEO of Key Square Capital, points us to this chart by RenMac which examines stock market performance based on who is favored to win the election based on polls and betting markets.

Their findings? Stocks returned 35.2% above trend when Trump was favored versus 3.4% when Biden was in the lead. Notice that Trump has moved up in the polls in the last few months the stock market has been bullish.

Is this a coincidence? Maybe. Maybe not.

The full Bessent memo is here: https://www.scribd.com/document/703023305/Key-Square-January-2024-Letter#from_embed