2024-11-06 14:30:00
The financial markets are celebrating on Wednesday after Donald Trump managed to win the keys to the White House for the second time.
“So far, markets are following the same scenario as in 2016 during Trump’s victory: stocks are rallying, while long-term US Treasury bonds are being sold off in anticipation of a fiscal expansion,” he said. commented Gordon Shannon, portfolio manager at TwentyFour Asset Management.
The markets’ attention should subsequently “focus on the inflationary consequences of customs tariffs and the drop in immigration,” he continued.
Rates are climbing
On the bond market, where already issued debt is traded, the interest rate on 10-year US government bonds jumped to 4.44% around 5:55 a.m. EST on Wednesday, compared to 4.27% at the close on Tuesday. , and that with a two-year maturity rose to 4.26%, compared to 4.18%.
This is a sign that the market expects “stronger growth and perhaps higher inflation”, a combination which could “slow down, or even stop”, the rate cuts planned by the American central bank (Fed ), underlined Stephen Dover, director of the Franklin Templeton Institute. The next meeting of Fed officials will be held Wednesday and Thursday.
On Wall Street, in electronic trading before the opening of the New York Stock Exchange, shares of American banks were up sharply, driven by soaring borrowing rates. JP Morgan jumped 6.63%, Bank of America 7.93%, Citigroup 8.21, Goldman Sachs 7.01% and Wells Fargo 8.62%.
The sought-after dollar
The dollar is soaring against the majority of other currencies. Around 5:55 a.m. EST, it gained 1.66%, to $1.0751 per euro. The Dollar Index, which compares the greenback to a basket of currencies, reached a peak since the beginning of July, at 105.311 points.
“In Mexico, concern over possible increases in customs tariffs is causing the peso to plunge,” noted analysts at Saxo Bank. The Mexican currency dropped 2.68%, to 20.6535 pesos per dollar.
Bitcoin at a record high
Bitcoin soared 6.86% to $73,905, after hitting a new absolute record at $75,371.67, boosted by the prospect under the presidency of Donald Trump of regulatory relaxation and tax measures favoring the cryptocurrency sector.
European stock markets surprise
Wall Street is headed for a sharply higher open, according to stock index futures, which provide an indication of trends before the session begins. Bitcoin at a record high
Around 11:55 GMT, the Dow Jones gained 2.95%, the broader S&P 500 index gained 2.30%, while the NASDAQ gained 1.76%, according to these futures contracts.
On the American stock market, the action of the Tesla group, owned by Elon Musk, rose by almost 15% in trading preceding the opening of the New York Stock Exchange. The title was carried by the support shown by the billionaire for Donald Trump.
Few details have filtered out about the casting of the future Trump administration, with one notable exception: the Republican declared that he would entrust responsibility for a large audit of the American state to Elon Musk, who spent more than 110 million dollars of his fortune for Donald Trump’s electoral campaign.
On the European stock markets, the indices are on the rise. Around 5:55 a.m. EST, the Paris Stock Exchange jumped 1.39%, London 1.25%, Frankfurt gained 0.84% and Milan 0.62%.
“This reaction is surprising and counterintuitive with the return of Trump,” noted Alexandre Baradez, head of market analysis at IG France.
“With the arrival of Donald Trump in the White House, European products could face significant challenges, because” he “has made it clear that he will impose vast customs duties,” explained John Plassard, specialist in investment for Mirabaud.
The Republican wants to increase them to between 10 and 20% for all products entering the United States, and up to 60% for those coming from China or even 200% for certain types of goods.
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**Interview with Gordon Shannon, Portfolio Manager at TwentyFour Asset Management**
**Interviewer**: Thank you for joining us today, Gordon. The financial markets appear to be reacting positively to Donald Trump’s victory. Can you describe the current market sentiment?
**Gordon Shannon**: Absolutely. The mood is decidedly risk-on. We’re seeing parallels to the market’s behavior in 2016 when Trump first won. Stocks are rallying significantly while long-term Treasury bonds are being sold off, indicating strong expectations for a fiscal expansion.
**Interviewer**: You mentioned a fiscal expansion. What does this imply for investors, particularly regarding inflation?
**Gordon Shannon**: That’s a crucial point. As we anticipate Trump’s policies, particularly concerning customs tariffs and immigration, there are valid concerns about inflation. Investors should keep a close eye on these factors, as rising inflation can lead to market adjustments in the long term.
**Interviewer**: We’ve seen a notable increase in interest rates, particularly for 10-year government bonds. What does this signify for the broader economy?
**Gordon Shannon**: The spike in interest rates indicates that the market is expecting stronger growth and potentially higher inflation. This situation could change the trajectory of the Federal Reserve’s planned rate cuts, which are critical to market dynamics.
**Interviewer**: Wall Street banks are experiencing substantial gains this morning. What’s driving this surge?
**Gordon Shannon**: The increase in borrowing rates certainly plays a significant role. Banks like JP Morgan, Bank of America, and others are benefiting from this environment as it typically boosts their profit margins. The market clearly has confidence in their future earnings potential under the current administration.
**Interviewer**: We’ve also noticed that Bitcoin has reached a record high. How are cryptocurrency markets responding to this political shift?
**Gordon Shannon**: Cryptocurrencies often react to regulatory expectations and fiscal policies. With Trump potentially relaxing regulations and favoring tax measures that benefit the crypto space, it makes sense to see Bitcoin surging. Investors are speculating on a friendlier environment for cryptocurrencies.
**Interviewer**: what should investors be wary of as this new administration begins to take shape?
**Gordon Shannon**: Investors should remain vigilant about the possible inflationary impact of Trump’s policies, particularly around tariffs and immigration. It’s also essential to monitor how the Federal Reserve responds in their upcoming meetings. The dynamics are rapidly evolving, and market conditions could shift significantly depending on these decisions.
**Interviewer**: Thank you, Gordon, for sharing your insights on this pivotal moment for the markets.
**Gordon Shannon**: My pleasure, thank you for having me.
