If you wake up one day and find that the US stock market and the dollar have skyrocketed due to the Republican party's victory, wouldn't you feel like you've hit the jackpot? But wait, can this 'Trump trade' euphoria really make you laugh in the end?
As the 2024 US presidential election approaches, the market has begun to stir, anticipating the arrival of the 'Trump trade.' If the Republican party indeed wins overwhelmingly, a series of market-friendly policies, such as tax cuts and deregulation, will be like giving wings to the US stock market and the dollar, making it look like they will soar in the short term.
Reports from Zhongjin Company have indicated that many assets have already begun to factor in expectations of Trump's policies. If the Republican party wins, those hesitant investors will surely rush in, fearing they might miss out on this feast. In this case, won't the short-term trend of the US stock market and the dollar be even more explosive?
But have you thought about how long this euphoria can last? UBS Wealth Management's Asia Pacific investment director's office reminds us that the election results are just one factor influencing US stock returns, and the impact of policy changes is also limited. Even if the Republican party wins decisively, the medium- to long-term performance of the US stock market will still depend on the stability of economic growth, the Federal Reserve's interest rate policies, and the investment intensity in high-tech industries such as artificial intelligence.
In other words, Trump's policies are like a shot of adrenaline for the US stock market and the dollar, but in the long run, it still depends on its own strength. If the US economy becomes unstable, or if the Federal Reserve starts tightening monetary policy, can the US stock market and the dollar still soar?
Now let's talk about the dollar; if the Republican party really wins, the dollar may get a boost in the short term due to the 'Trump trade.' Trump is a strong supporter of American manufacturing, and tax cuts and deregulation can make companies more competitive, so investors' confidence in the dollar will surely increase.
However, the long-term trend of the dollar is not that simple. The international economic environment, the Federal Reserve's monetary policy, and changes in global trade can all affect the dollar's performance. Although Trump's policies can bring temporary glory to the dollar, if global economic competition intensifies, can the dollar maintain its strength?
A Republican victory is indeed good news, but long-term risks cannot be ignored. To stand firm in the market, one still needs to rely on their own judgment and analysis.
Don't let short-term euphoria cloud your judgment!
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