Wall Street is increasingly interpreting President Donald Trump’s economic messaging less as a set of specific policy proposals and more as a broad signal: the White House is prepared to lean hard on growth and affordability ahead of the midterm elections in November. From relentless calls for lower borrowing interest rates to vague talk of capping credit card interest rates , the flow of pro-growth rhetoric shows an administration focused on keeping consumers spending and the economy humming. Wall Street strategists say that the administration’s positions favor cyclical assets that benefit from growth versus defensive stocks that might outperform when the economy is sluggish. “Our belief is that meaningful monetary and fiscal support along with nearly daily tweets from President Trump threatening actions intended to boost the cyclical economy (one can only assume this will continue until the midterms), is likely to make it a tough year to bet against a cyclical recovery” analysts at Raymond James wrote Sunday in a note to clients. The investment bank highlighted industrials, materials and consumer discretionary stocks as the most direct beneficiaries. Banks and financial services stocks slid Monday after Trump called for a 10%, one-year cap on credit card interest rates. UBS strategists believe that a cap on credit card rates — if imposed at all — would probably be narrow and temporary, limiting any drag on growth. “We view Trump’s latest moves in the context of the U.S .midterm elections in November,” the UBS strategists wrote in a report out Monday. “In our view, votes are likely to be based less on policy and more on prices.” Rather than the pace of economic expansion, UBS believes the cost of “housing, gasoline, interest rates, and coffee matter” more next autumn to voters in Senate, House and state races. In the short run, though, UBS maintained an attractive view on U.S. financials, arguing that any pullbacks in bank stocks would represent buying opportunities. Even if an interest rate cap were imposed, “card issuers and lenders would likely prioritize protecting margins over volumes” and tighter lending standards and new fees could offset lost interest income, UBS said. Stars align for cyclicals Strategists at JPMorgan also see the macroeconomic backdrop aligning to favor cyclical stocks as inflation pressures ease. The bank expects softer wage growth, cooling services prices and medium-term downside pressure on crude oil combining to push inflation lower in 2026, giving policymakers more room to support growth. JPMorgan said a pickup in earnings momentum could justify multiple expansion and drive outperformance in growth-sensitive sectors. although relative valuations do not yet look compelling. “Within our constructive equity outlook, driven by supportive Growth Inflation tradeoff that we see for 2026, we believe that Cyclical sectors will be the outperformers,” JPMorgan analysts wrote. — CNBC’s Michael Bloom contributed reporting.
