Following Trump's victory, Trump's trade dominated market reaction: U.S. bond interest rates rose, the U.S. dollar strengthened, expectations of interest rate cuts retreated, and U.S. stocks received marginal stimulation and the three major stock indexes rose.
Author of the article: Securities Regulatory Commission licensee
Article source: Hong Kong Economic Daily
Last week, the U.S. election concluded with Trump winning the White House for the second time, and the Republican Party is expected to control both the House of Representatives and the Senate. Following Trump's victory, Trump's trading dominated the market reaction: U.S. bond interest rates rose, the U.S. dollar strengthened, expectations of interest rate cuts retreated, and U.S. stocks received marginal stimulation and the three major stock indexes rose.
We expect that Trump’s policy line will continue to cut taxes, relax regulations, restrict immigration, increase tariffs, tighten foreign aid and other policies. However, the 2.0 version of the team has more professional staff, a worse financial situation, or may reverse existing industrial policies. and greater deregulation. In the event of a "sweep" by the Republican Party, it is expected that the U.S. GDP growth rate for the whole year in 2025 may be 2.4%, and the quarterly growth path may be "high at first and then low". If Trump is elected, his domestic tax cuts and tariff increases will Bringing reflation pressure, core inflation may pick up, the pace of interest rate cuts may also slow down, market volatility will significantly intensify, the central U.S. bond interest rate may increase accordingly, and the U.S. dollar index may rise more easily than fall.
In terms of virtual currency, Trump stated many times during the campaign that the innovative spirit and independence of Bitcoin and cryptocurrency are in line with the core values of the United States. He emphasized that if the United States does not take the lead in embracing cryptocurrency, other countries will dominate the field. Therefore, he plans to support cryptocurrencies in the form of policies to enable the United States to take a leadership position in global Bitcoin and blockchain technology, especially Bitcoin, and position the United States as the "Cryptocurrency Capital." These policies may bring new development opportunities to the U.S. technology industry.
In terms of financial markets, Trump's policies have a significant short-term stimulus effect on the U.S. economy, but they may also bring inflationary pressure. U.S. bond yields are expected to rise and the U.S. dollar may remain strong, which will affect global capital flows. In particular, emerging market countries may face capital outflows and currency depreciation pressures.
In terms of gold, Trump's no-war philosophy has caused a short-term retracement of gold prices. At the same time, the U.S. dollar is expected to remain strong, and short-term U.S. dollar credit risk margins have declined. A strong U.S. dollar has also reduced the attractiveness of gold, adding to the risk aversion amid expectations of easing geopolitical risks. Sentiment declines, and gold prices may remain contained. On the other hand, the increasing appeal of Bitcoin has partially diverted funds from investing in gold. From a mid- to long-term perspective, Trump's policies have not been fully determined, and the idea of stimulating the U.S. economy through domestic tax cuts and increased tariffs in the future has not yet been implemented. The mid-term performance of gold is still uncertain.
In terms of the U.S. dollar index, tax cuts and trade policies have driven the U.S. dollar to strengthen significantly. After Trump won the election, the U.S. dollar index strengthened significantly, and the U.S. dollar against the offshore yuan (USDCNH) was significantly restrained. On the one hand, tax cuts are expected to increase the profitability of U.S. companies and increase residents’ disposable income, thus stimulating economic growth. Expectations of economic growth typically push the U.S. dollar index higher. On the other hand, trade policy advocates imposing high tariffs on imported goods, especially high tariffs on Chinese goods, which will increase the cost of imported goods and push up domestic inflation, which may in turn push up the U.S. dollar index.
