An essay of how i markets would move in the era “Trump-bis” they provided it last June, but now investors seem to have clearer ideas: sell bond, with a relative increase in yields e buy stocks and bitcoin, with one eye laurel and friends. Why? Based on the economic premises expressed by Trump, the next actions will be aimed at greater government spending, greater paper issuance and greater inflation. And the markets are gearing up
At the end of June the trend could already be seen on the markets: this was when Trump prevailed in television duel with the president in office, Joe Biden, who instead appeared tired and sometimes confused. It is from there that Trump began to gain ground in the specific polls who now give him victory in the November elections for the 47th president of the United States as favorite with 70% of the vote. And that's where the new market trend, confirmed in these hours, after the attack on Sunday.
Both at the end of June and yesterday, investors have bought US shares, with Wall Street stock indices S&P 500 and Nasdaq su new records. After all, when Trump was in the White House for the first time, by 2017 to 2021, the S&P 500 was up 69%, the Nasdaq was up 142% and the Dow Jones was up 57%. On the contrary, they saw each other bond sales: yesterday the 10-year Treasury yield began to rise again (from 4,19% to 4,24%) while the two-year bond remained flat: it is precisely the long part of the US debt curve that could be the most affected by Trump's possible re-election.
Trump's economic ideas and inflation
Based on the premises, but also on history, linked to the economic policy expressed by Trump in his first mandate, they could see themselves taken measures that usually push inflation higher: the new ones tax cuts (which would further increase the deficit), i duties 60% on all Chinese products and 10% duties on the rest of the world, including Italy and Europe, the policy of tightening to immigration, which would lead to an increase in real wages.
La Fed to fight inflation it has raised rates repeatedly and only next September should the trend begin to occur, given that the latest data shows a decline in consumer prices. But Trump has shown that he has a different view on inflation. Trump has repeatedly shown irritation with Powell's monetary policy and, if re-elected, he could do everything to prevent him from responding to a rise in inflation with further rate hikes. In fact, Trump has repeatedly shown that he considers Powell an "enemy" and the advisors closest to the Republican candidate continue to produce plans to put the central bank under political control. In his first term, Trump had put a lot of pressure on the Fed to cut rates, so much so that in 2019 there were 3 cuts.
Debt growth = new issues of Treasuries
Trump's plans will evidently result in further debt growth American federal government, already at records, through powerful new ones emissions offered on the market. In the last four quarters recorded by the St. Louis Federal Reserve the American public debt issues have grown by 3.100 billion dollars, with one trillion to be found on the market every 100 days, already today, to support the federal budget and which shows a 6,5% deficit and a public debt of 123% of GDP. It should be noted that when yields on US debt rise, they usually drag the yields higher as well yields on Italian debt, which for us means a higher interest cost for the State.
Towards a steepening of the yield curve
If we once again breathe the air of rising inflation, the perfect investor's manual is clear: sell the long portion of Treasuries, That more exposed to inflation. In what experts have already baptized as “Trumpfolio”, which they consider overall riskier and more volatile, we could see a steepening of the yield curve. Since July 2022, when the Fed began tightening its monetary policy, 2-year yields are higher than 10-year yields. Instead, with Trump, based on what the market is expressing now, we could see atrend reversal: short-term rates could fall more rapidly and long-term rates could rise or at least slow down: since the end of June the 10-2 year differential has gone from -49 basis points to -23 yesterday.
Raw materials: gold rises close to historic highs
To protect yourself frominflationary erosion of purchasing power, the privileged asset on the markets is their. Yesterday he broke through the threshold of 2.400 dollars an ounce and he moved within a very short distance of his parents historical highs.
The gain since the beginning of the year fluctuates between +17,50%, if expressed in dollars, and +18,80%, if expressed in euros. But gold prices could rise up to $3.000 per ounce as flows “have ample room to expand,” Citi wrote in a note to clients. The same forecast was made by Bank of America (BofA) at the end of June.
Trump more favorable to the crypto world
And then there is the Bitcoin and the crypto world in general, always supported by Trump, contrary to what the Democrats did. The number one cryptocurrency in the world began to rise immediately after the news of the attack, rising above 60.000 dollars to a peak above 63.000 dollars, the highest of the last two weeks. While he has never indicated how he would support the sector, Trump has maintained a largely supportive position, recently stating that Bitcoin's future should be built in the United States and not abroad. Trump is expected, unless his agenda changes, to speak at the Bitcoin Conference in Nashville later this month.
