*BayFort Capital: Mid-Month Review* We are witnessing a pivotal moment for the US stock market, driven by multiple factors fuelling strong positive sentiment. Below are the key reasons why we see significant upside potential: *1) Stock Market Sentiment - A Political Boost:* With President Trump back in the White House, the optimism in US markets mirrors the sentiment India experienced when Prime Minister Modi took office in 2014. Investors are hopeful for sweeping reforms in bureaucracy, fiscal policy, lower taxes, and renegotiated trade deals— all of which could fuel a resurgence in US manufacturing and economic growth. *2) Lower Taxes - A Direct Earnings Boost:* Trump has pledged to maintain corporate tax rates at 21%, preventing a scheduled increase of corporate taxes to 27% in 2025. This alone translates to a 5% earnings boost for S&P 500 companies. Moreover, he has proposed further cutting corporate taxes to 15%, an upside scenario that, if realized, could drive another 10% increase in S&P 500 earnings— a factor that has yet to be priced into market models. *3) Trade Policy:* The ongoing efforts to renegotiate trade agreements globally aim to create a more balanced and equitable trade environment. This could stimulate US domestic manufacturing activity. However, it also raises the possibility of tariffs on imports. The US dollar's potential strengthening in response to these tariffs is a likely scenario, which may persist during the renegotiation process. The strengthening of the USD vs. INR adds to the returns of Indian investors in global equities. *4) The AI Innovation Boom* - The Next Wealth Creation Wave: The ongoing AI revolution—led primarily by US companies—has the potential to generate wealth on a scale comparable to the internet and mobile revolutions combined. Investing in US stocks remains the best way to gain exposure to AI innovation, and we strongly believe the next generation of trillionaires will emerge from AI-driven companies. This is just the beginning and we see many more years of AI-fueled growth for US AI stocks. *5) Interest Rate Cuts* - A Strong Safety Net: The Federal Reserve has signaled its readiness to cut rates if US economic conditions weaken. We anticipate at least two rate cuts in 2025, providing strong support for stock prices. Historically, rate-cut cycles have been a highly favorable environment for US equities, offering investors a solid cushion against market volatility. With multiple tailwinds—ranging from tax cuts and trade policy shifts to AI-led innovation and Fed support combined with reasonable valuations — the US stock market is positioned for strong returns. We believe this is an exceptional time to invest in US equities and capitalize on the opportunities ahead.