Wall Street welcomes Trump's comeback, but with trepidation

Wall Street executives praised the prospect of business friendly regulations and a flurry of deals, as they analysed the implications of Donald Trump’s reelection. However, some were uneasy over his unpredictable nature.

Executives from banks and private equity firms said that Trump's return will likely ease some of the regulatory pressures that existed under Biden's administration.

Many people expect a smaller government, broader deregulation and tax incentives for wealthy corporations. They said that a more lenient antitrust policy and less regulation of areas like banking and cryptocurrency could increase corporate profits and encourage deal flow.

Euan Rellie is the co-founder and managing director of BDA Partners, an investment bank. He said: "He's pro-business and against regulation." "His instinct is to reduce taxes. "All of this will help the M&A Market."

Rellie said that the markets would welcome him as long as he governs in moderation, and not chaos.

Some executives, however, said it was not a certainty.

Bankers are concerned about the unpredictable changes in government policy. They also worry about the impact of tariffs on trade, a fiscal path that could add trillions of dollars to national debt, and the possibility of tightening visa programs.

For the moment, however, there was an euphoric reaction. One equity capital markets banker, who did not want to be identified, said that his colleagues received new mandates on Wednesday morning as U.S. stock prices rose sharply. They also had the opportunity to pitch an IPO. The banker's message was "Let's start the ball rolling."

A New York investment banker said that his firm also had an internal meeting to discuss possible deals. This could include revisiting transactions which may not have passed regulatory scrutiny during the Biden administration under Lina Khan’s Federal Trade Commission.

More Business

An approach more lenient to antitrust matters could increase dealmaking in several sectors. Two media experts said that the industry was due for two years' worth of consolidation.

Greg Hertrich of Nomura's U.S. Depository Strategies predicted more mergers in the banking industry. He said that the number of banks in America could be reduced from 4,700 to 2,500 within a short time.

Deals involving large financial amounts will be more likely to get approved. After Trump's election, shares of Capital One and Discover Financial Services, which were awaiting approval for a $35.3-billion deal, soared.

Gene Ludwig, former head of the Federal Reserve and CEO of Ludwig Advisors, who advises financial organizations as a former bank regulator, said that it is expected that Trump's administration will be open to more sensible M&As.

One of the most important questions for banks is how strict new Basel Capital Standards will be.

Ed Mills, an analyst at Raymond James, said that the change in regulators with the new administration will "stall" the super-cycle of bank regulation that existed for the past couple of years.

Mills said, "We're unlikely to see major regulations for banks and this all paints a very positive picture for banks."

Stocks of banks have risen on the expectation that they will be able to enjoy a more relaxed regulatory environment under Trump. The KBW Banks Index which tracks the large-cap banks closed nearly 11% higher on Tuesday but dropped back 2% on Wednesday.

Many Worries

But not everyone celebrated. One lawyer who represents renewable energy companies told a reporter that he spent the entire day on the phone talking to clients who were depressed. All of them were trying to contact local Republican politicians from districts where they had planned projects. They wanted assurances that the tax incentives and incentives offered by Biden under his push for green energy will continue.

One source reported that a discussion took place at a Wall Street firm about the possibility of a rise in deficits under a Trump Administration. According to one estimate, his policies could add $7.5 trillion in deficits over a period of 10 years.

Source: Participants hoped Trump's advisers would encourage Trump to not go to extremes on tariffs and tax reductions.

Some concerns were more personal such as the safety of non-U.S. employees. During Trump's first presidential term, he tightened access to certain visa programs. This included suspending many visas for work during the COVID epidemic.

An investor in private equity said that international employees with H-1B visas asked a New York-based private equity firm on Wednesday if they would be able to renew their visas, and if their employers could help them.

(source: Reuters)