Institutions "banned from buying houses" and military industry "dividend restrictions"—Trump's post stirs up U.S. stocks

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A few posts on social media once again made Wall Street experience the violent shocks brought by policy uncertainty.

On Wednesday, January 7 (local time), U.S. President Trump issued a series of policy statements targeting housing and the defense industry on social media platforms, triggering sharp fluctuations in U.S. stock markets.

Trump first announced that he would take “immediate” action to ban large institutional investors from purchasing more single-family homes, and asked Congress to legislate it, aiming to address housing affordability issues. The news quickly sparked market panic, causing shares of related companies, including private equity giants and large home rental firms, to be sold off. Then, he turned his attention to defense contractors, warning that they must not pay dividends or buy back stock before speeding up production and maintenance.

However, market sentiment reversed after the close. After defense stocks fell due to the dividend restriction comments, Trump issued another post stating that the military budget for 2027 should reach $1.5 trillion. This positive news pushed related stocks to rebound in after-hours trading. Such a “stick and carrot” strategy left traders at a loss.

This series of sudden news broke the calm of the U.S. stock market early session. The S&P 500 index approached the 7000-point mark around midday but ultimately closed down 0.3% due to the impact. Investors are trying to discern whether these statements represent a substantive policy shift or Trump’s usual negotiating tactic.

Institutional “No Home Buying” Remarks Hammer Real Estate Stocks

At 12:45 PM New York time on Wednesday, Trump posted that he would take measures to ban institutional investors from buying single-family homes. Trump wrote on the social platform Truth Social: “Homes are for people to live in, not for companies to occupy.” He pledged to ask Congress to pass related legislation and planned to discuss the issue at the World Economic Forum in Davos later this month.

For a long time, buying and owning a home has been considered the pinnacle of the American Dream—a reward for working hard and doing the right things. But now, record high inflation caused by Joe Biden and the Congressional Democrats is making this dream increasingly hard to achieve, especially for young Americans.

People live in houses, not companies.

The market quickly reacted violently, with stocks of companies considered to have high risk exposure plunging.

As a major investor in residential real estate, Blackstone Group’s stock fell as much as 9.3% intra-day and ultimately closed down 5.6%. The largest single-family rental home owner in the U.S., Invitation Homes Inc., saw its stock drop as much as 10% and close down 6%. Additionally, American Homes 4 Rent fell 4.3%, building materials company Builders FirstSource Inc. dropped 5.6%. The S&P 1500 Homebuilders Index fell 2.6%, with 15 of its 18 components closing lower.

Jeffrey Langbaum, Senior Real Estate Analyst at Bloomberg Industry Research, said: “He clearly can use some means to try what he’s saying, which would make things tough for these companies. When you stand on the side that helps individuals buy homes more easily and only need to blame big institutions, that kind of talk has strong appeal in the market.”

Defense Stocks: From Dividend Restrictions to Budget Boosts

Less than an hour and a half after posting about the housing market, Trump targeted the defense industry. In an afternoon post, he warned that defense contractors are not allowed to pay dividends, buy back shares, or pay executives more than $5 million in compensation unless they speed up the production and maintenance of military equipment.

Reportedly, Trump named RTX Corp. (formerly Raytheon Technologies), threatening to cease doing business with the company unless it increases investment in production capacity. RTX shares fell 2.5% during regular trading and dropped a further 6% in after-hours trading.

However, the decline did not last long. Shortly after regular trading ended, Trump made another post calling for next year’s defense budget to be $1.5 trillion. This massive budget number quickly boosted market sentiment, helping defense stocks recover lost ground in after-hours trading.

Art Hogan, chief market strategist at B Riley Wealth, said: “It’s hard for the market to digest things at the speed information is delivered via social media. There’s no buffer for the president’s internal thoughts before they’re published directly, and the market’s attempt to adapt to this process will be dangerous.”

Wall Street Questions Feasibility and Real Impact of Policies

Despite the strong market reaction, Wall Street analysts expressed doubts about the practical effect and feasibility of Trump’s housing ban.

According to SFR Analytics, the impact of institutional investors on housing opportunities is often overstated. The top 24 single-family rental home owners together hold about 520,000 homes, accounting for only about 3.5% of the U.S.’s 15 million rental homes, and less than 1% of all single-family housing stock.

Blackstone Group responded in a statement: “The single-family homes we own in the United States are only about 2% of our real estate assets under management and 0.5% of our overall scale. Moreover, throughout the past decade, we have consistently been a net seller of homes.”

Jake Krimmel, Senior Economist at Realtor.com, pointed out in a report that completely driving institutional investors out of the market is unlikely to make home prices more affordable. He believes: “The affordability crisis is fundamentally a supply issue. Large corporate ownership within the broader supply debate is just a red herring.”

Joe Gilbert, portfolio manager of Integrity Asset Management, also expressed doubts: “First, we doubt this could be enforced. Second, while institutional buyers have grown, they are not marginal buyers. We think this is a short-term negative for home prices but don’t believe it is sufficient to solve the affordability issue for homebuyers.”

Jeffrey Rubin, president of Birinyi Associates Inc., thinks this may just be Trump’s negotiating tactic. “If his threat comes true, it would be a huge shift, but the ultimate results remain to be seen.”

Risk Warning and Disclaimer ClauseThe market has risks, investment requires caution. This article does not constitute personal investment advice, nor does it consider individual users’ specific investment objectives, financial situations, or needs. Users should assess whether any opinions, viewpoints, or conclusions in this article suit their particular situation. Investment based on this is at your own risk. ```