On November 6, 2024, the US election became the focus of the global market, and various assets fluctuated sharply. According to Xinhua News Agency, Republican presidential candidate Trump has won more than 270 electoral votes, locking in the victory of the 2024 presidential election.
Today, global markets have returned to the "Trump trade". Among them, the US dollar, US bonds, and Bitcoin have soared, emerging market currencies have weakened, commodities such as crude oil and gold have weakened, and US stock futures have soared, just waiting for the shoe to drop. After Trump secured victory, the rise and fall of various assets have fallen back.
Now that the election is over, how it will affect all major asset classes has attracted global attention. We will also make a prediction about the next market trend based on some market reactions after Trump was first elected as the US president in 2016.
Short-term volatility
On election night in 2016, U.S. stock futures initially plunged after news of Trump's victory, with Dow Jones futures falling more than 800 points at one point. However, the next day, stocks quickly rebounded and closed higher. The Dow, S&P 500 and Nasdaq Composite all posted substantial gains.
From November 9, 2016 to early 2017, the US stock market continued to rise, a period known as the "Trump concept". Market expectations of Trump's tax cuts, infrastructure investment plans and deregulation measures drove economic growth. The financial, energy and manufacturing sectors performed particularly well, benefiting from Trump's economic policies.
The market returned to the Trump deal, and the US dollar, US bonds, and Bitcoin rose sharply.
The US dollar index has been rising all the way, once soaring 1.58%, successfully breaking through the 105 mark, hitting a nearly 4-month high. As the market unanimously believes that Trump's re-election may implement extremely loose fiscal policies to stimulate the US economy and larger-scale trade protectionism, the market has returned to the "Trump deal", and the exchange rate of the US dollar against many other currencies has strengthened significantly. The RMB exchange rate against the US dollar has already reacted first, falling more than 900 points during the day and breaking below the 7.19 mark.
Meanwhile, the Federal Reserve will end its two-day meeting on Thursday and is expected to cut interest rates by 25 basis points. The CME Fedwatch tool shows that the probability of the Federal Reserve cutting interest rates by 25 basis points in November is 97.5%.
The yields of U.S. Treasury bonds of all maturities rose sharply. Among them, the yield of the 10-year U.S. Treasury bond rose by 15 basis points to 3.69%, and the yield of the 5-year Treasury bond rose by 13 basis points to 3.04%.
As Trump supports cryptocurrencies, the cryptocurrency market is in a state of excitement. Among them, Bitcoin soared 8% today, once rising to $75,000, breaking the historical high set in March this year; Ethereum soared 6.87% to $2,591.10; Dogecoin once soared by more than 30%. At the same time, many election-related meme coins also saw good gains.
Trump once said that if he returns to the White House, he will make the United States the global capital of cryptocurrency, establish a strategic Bitcoin reserve, and immediately appoint the current SEC chairman and a regulator who loves digital assets. I believe that more crypto asset ETFs will appear in the public eye in the future.
The three major U.S. stock index futures continued to rise, with Dow futures up 1.81%, Nasdaq futures up 1.82%, and S&P 500 futures up 1.85%.
The strong dollar has led to a drop in international oil and gold prices
Due to the strengthening of the US dollar index and the surge in Treasury yields, international oil prices fell sharply, and the current decline has widened to 2% to $70.5. Shanghai Energy Center crude oil futures closed down 0.56% at 532.7.
A higher dollar index means that dollar-denominated commodities become more expensive for buyers holding other currencies, suppressing crude oil prices. The crude oil market is still under pressure from oversupply.
Under the pressure of the strong dollar, gold also encountered certain pressure, which is consistent with the logic of crude oil. The prices of commodities denominated in US dollars all fell under pressure. Today, the London spot gold price fell by 1.16% to $2,711; the main contract of CMX gold futures fell by 1.03% to $2,721.3.
Long-term volatility
Trump's series of policies have also had many long-term impacts on the financial market:
Tax policy: The tax reform bill passed at the end of 2017 further boosted corporate profit growth, driving the U.S. stock market to continue to rise.
Trade War: The U.S.-China trade war that began in 2018 caused some turbulence in the markets, but overall, U.S. stocks have proven to be quite resilient.
Policy impact: Whether in 2016 or 2024, the market remains optimistic about Trump's tax cuts, infrastructure investment plans and deregulatory measures. These policies are expected to continue to drive gains in U.S. stocks and push Treasury yields higher. Financials, energy and industrials may do well, while technology and healthcare may also benefit, although their growth may not be as dramatic as that of cyclical sectors.
Economic data: In 2017, the U.S. economy performed strongly, with GDP growth and employment data exceeding expectations, boosting market confidence. If Trump's policies in 2024 are effective in stimulating the economy, similar economic data performance could boost market confidence and drive stock prices higher.
Market Sentiment: In the early period after Trump's election in 2016, the market's risk appetite increased significantly, with investors preferring to invest in riskier assets such as stocks. Sentiment may be similar in 2024, but investor expectations for Trump's policies may be more mature and stable, potentially leading to lower market volatility.
In summary, both the U.S. stock and bond markets are expected to experience a series of major changes after Trump is re-elected as U.S. President in 2024. U.S. stocks may experience a rapid rebound in the short term and continue to rise, benefiting from the market's positive expectations for Trump's economic policies. Treasury yields may rise due to increased inflation expectations. These changes reflect the market's confidence in the Trump administration's policies, but they are also accompanied by a certain degree of volatility and uncertainty.
How does it affect various types of assets?
Judging from previous expectations, the market remains optimistic about U.S. stocks, gold, and cryptocurrencies, which is the current consensus among various asset classes.
The 10 billion private equity firm Xingshi Investment pointed out that in the medium term, U.S. stocks are supported and the central axis of long-term U.S. Treasury bond yields will rise, but the U.S. dollar is uncertain.
Among them, from a medium-term perspective, Trump's tax cuts will help the US economic growth and corporate profits, which is still the main logic for the rise of US stocks. Structurally, Trump's policy proposals are good for the financial, industrial and technology sectors. However, the current valuation of US stocks is relatively high. If Trump launches extreme policies after his election, which leads to a decline in risk appetite, it may cause fluctuations in US stocks. Musk's support and support for Trump also shows Musk's unique vision. At the same time, "Musk buys Twitter" also provides a very large public opinion support for the Republican Party's later canvassing.
U.S. Treasuries, economic resilience, inflation expectations and U.S. Treasury supply pressures have jointly pushed up the central rate of long-term U.S. Treasury bond interest rates, and the U.S. Treasury bond interest rate curve may become "steeper". First, recently released data show that the U.S. economy is still resilient, and the Fed has started a cycle of interest rate cuts, which has increased the probability of a soft landing of the U.S. economy; second, domestic tax cuts, external tariffs and stricter immigration policies have increased the pressure of secondary inflation that the United States may face; third, loose fiscal policies have brought market concerns about the supply of U.S. Treasury bond interest rates.
US dollar index. Although the series of stimulus policies advocated by Trump have a pulling effect on the US dollar index, the Trump team has expressed its hope to strengthen the competitiveness of US manufacturing and exports by intervening in the weakening of the US dollar. The contradictions between the policies have led to uncertainty in the trend of the US dollar index.
Although gold is under pressure in the short term, the market is still bullish on the medium- and long-term trend of gold due to frequent geopolitical conflicts and its anti-inflation characteristics. At the macro level, gold prices have two pricing logics that cross paradigms, namely inflation and fiscal. The former means that when US inflation rises, the US dollar depreciates internally, and gold appreciates relative to the US dollar. The fiscal logic is reflected in the synchronization of gold prices and the US federal deficit rate. The continued fiscal expansion overdraws the credit of the US dollar, and the allocation value of gold increases.
CICC Research believes that the United States has returned to the era of big fiscal policy with bipartisan consensus, and the central interest rate will remain high for a long time, so the incremental demand for gold ETFs may be limited, but the space for central banks in emerging markets to purchase gold is expected to open up further from a low level. We believe that inflation, fiscal policy, and central bank gold purchases are expected to jointly promote the continuation of the structural bull market in gold, and the biggest risk to gold prices in the long term may be AI.
Xingshi Investment believes that the performance of bulk commodities is differentiated. Industrial products such as oil and copper are mainly affected by the supply and demand pattern. Gold is expected to remain strong in the long run. The impact on Chinese assets is limited, and the A-share market will still be dominated by China.
"Compared with other assets, Chinese assets reacted less strongly to Trump's transactions before the election in October, so the announcement of the election results may bring short-term fluctuations in domestic assets. However, considering that the market has a better understanding of Trump's personal style and policy propositions, there may not be much room for subsequent market expectations of transactions, and the persistence of this emotional disturbance should be weak."
CICC also said that Trump's ruling propositions will have a certain impact on major asset classes, which will be reflected in "a stronger dollar, neutral gold, and rising interest rates." Reviewing the A-share market trend during Trump's previous term, although the trade protection and technology restrictions against China have caused some disturbances to the market in the short term, the medium- and long-term performance of the A-share market is still mainly determined by domestic economic fundamentals and policy responses.