'Trump trade' intensifies in global markets

'Trump trade' intensifies in global markets
Expectation rises of return to White House for former president.
JUL 15, 2024
By  Bloomberg

As world financial markets reopened after the attempted assassination of Donald Trump, one thing was clear: The Trump trade is gaining momentum. 

The series of wagers — based on anticipation that the Republican’s return to the White House would usher in tax cuts, higher tariffs and looser regulations — had already been gaining ground since President Joe Biden’s poor performance in last month’s debate imperiled his re-election campaign. 

But the trades took deeper hold, with Trump galvanizing supporters and drawing sympathy by exhibiting defiant resilience after being shot in the ear on stage at a Pennsylvania rally.

Treasuries fell as trading kicked off on Monday, with long-dated bonds leading losses on bets Trump’s fiscal and trade policies will spur growth. The yield on 30-year bonds rose above two-year equivalents for the first time since January, steepening the curve.

The dollar edged higher against most peers, Bitcoin jumped above $60,000 while futures on the S&P 500 Index for September climbed 0.4%.

“For us, the news does reinforce that Trump’s the frontrunner,” said Mark McCormick, global head of foreign-exchange and emerging-market strategy at Toronto Dominion Bank. “We remain US dollar bulls for the second half and early 2025.” 

To be sure, there’s still plenty of room for surprises with almost four months to go in the US election campaign. The emergence of political violence may deepen concern about instability in the US and push investors into haven assets, potentially overshadowing some of the market positioning that has already taken place in the run-up to the election.

Moreover, some investors may want to book early gains or be wary of getting deeper into an already crowded position.

“Political risk is binary and hard to hedge, and uncertainty was high as it is with the close nature of the race,” said Priya Misra, a portfolio manager at JPMorgan Investment Management. 

“This adds to volatility. I think it further increases the chance of a Republican sweep,” she said, adding that “could put steepening pressure on the curve.” 

While traders generally don’t expect Trump’s assassination attempt to derail the stock-market trajectory in the long run, a pick-up in near-term price swings is likely. The market has already been contending with speculation that valuations have become too stretched, given the boom in artificial-intelligence stocks and the risks posed by elevated interest rates and political uncertainty. 

But investors have also been anticipating that bank, health-care and oil-industry stocks would benefit from a Trump victory.

“The attack will boost volatility,” said David Mazza, CEO at Roundhill Investments, predicting investors could seek temporary safety in defensive stocks like mega-cap companies. He said it “also adds support for stocks that do well in a steepening yield curve, especially financials.”

The reaction echoes what was seen after the first presidential debate in late June, when Biden’s weak performance was seen as fueling Trump’s election odds. 

While bond traders have been pricing in at least two interest-rate reductions in 2024, a major boost in Trump’s election odds could push the Federal Reserve toward staying on hold for longer, according to Michael Purves, CEO and founder of Tallbacken Capital Advisors.

“Trump’s stated policies are — at least now — more inflationary than Biden’s,” he wrote, “and we think the Fed will want to accumulate as much dry powder as possible.”

Latest News

DeVoe: Record-breaking RIA M&A run led by private equity's consolidator comeback
DeVoe: Record-breaking RIA M&A run led by private equity's consolidator comeback

A drop in interest rates and easier access to capital has reignited appetite among private equity-backed consolidators, who accounted for 53% of RIA deals so far this year- their highest share since 2021 according to DeVoe & Company.

Fintech bytes: Advisor360, Nitrogen unveil AI updates for advisor productivity
Fintech bytes: Advisor360, Nitrogen unveil AI updates for advisor productivity

Also, Advisor CRM announces a new data integration partnership to ease the pain of client onboarding.

Bank of America, Morgan Stanley earnings roll despite roiled markets
Bank of America, Morgan Stanley earnings roll despite roiled markets

Meanwhile, Merrill Lynch intends to continue building its alternative investment platform for wealthy clients.

David Fischer of Independent Financial Group talks culture, future growth
David Fischer of Independent Financial Group talks culture, future growth

The co-founder of IFG discussed with InvestmentNews the unique opportunity that remaining independent offers to build a successful firm.

Wealth Consulting Group taps veterans from Envestnet, Emigrant Partners for new advisory board
Wealth Consulting Group taps veterans from Envestnet, Emigrant Partners for new advisory board

Three industry leaders will join the hybrid RIA's president and LPL alum, Andy Kalbaugh, to help guide its organic and merger-based growth strategy.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.