Trump wins US presidential election

Donald Trump was elected the 47th president of the United States, marking a stunning political comeback in one of the most polarized contests for the White House in American history. Trump, 78, won an unprecedented race during which he faced felony convictions, survived two assassination attempts, and overcame a challenge from Vice President Kamala Harris, who replaced an unpopular President Joe Biden in the campaign’s final months.

He was elected by a country deeply divided over issues such as immigration, abortion, and foreign policy, while still grappling with the effects of the largest surge in inflation in four decades. Additionally, Trump played a key role in helping Republicans regain control of the Senate, highlighting his ability to tap into voter frustration.

US bonds slide most since pandemic

US Treasuries declined, with the 30-year bond experiencing its most significant drop since the pandemic began. This slide occurred as investors returned to the belief that Donald Trump’s potential return to the White House would drive up inflation.

Long-duration bonds were particularly affected, with 30-year yields rising by 24 basis points—the largest daily increase since March 2020. The losses were widespread across the curve, as traders reduced their expectations for future interest rate cuts by the Federal Reserve. Yields on the two-year note climbed by as much as 13 basis points.

These movements were intensified by a 30-year bond auction scheduled for later on Wednesday. This development favored those who bet on the so-called “Trump Trade,” anticipating a steeper and higher yield curve. Many investors expressed frustration for having pulled back at the last moment, following weekend polls that suggested US Vice President Kamala Harris was gaining ground, which led to a late increase in demand for protective hedges.

Current market sentiment indicates that investors believe Trump will focus on stimulating the economy. This expectation has prompted them to bet on potential policies such as tax cuts and tariffs that could drive price increases. The yield on 10-year Treasuries rose by 21 basis points to 4.48%, reaching its highest level since July. This movement contrasts with declines in European bond yields, as there are concerns that the euro area’s export-driven industries may suffer from US tariffs.

Trump to reshape US economy

Donald Trump is returning to the White House, potentially leading to significant changes in the US economy. He plans to escalate tariffs on all imports and implement major deportation measures. Additionally, he seeks influence over Federal Reserve policy, with many economists warning that his platform could result in higher inflation and slower growth.

During his campaign, Trump promised sweeping tax cuts, but achieving this may depend on an uncertain House election, despite Republicans controlling the Senate. A divided government would require him to negotiate more with Congress on fiscal policy.

Analysts warn that Trump’s tariffs may have the biggest economic impact. He previously imposed duties on $380 billion in imports and now promises broader measures, including a 10% to 20% tariff on all imports and a 60% tariff on Chinese goods.

Trump claims these tariffs could generate revenue, reduce the trade deficit, and encourage domestic manufacturing. However, most economists predict that inflation will rise as consumers face higher prices due to these tariffs.

Don’t make assumptions too quickly.

Although Trump has won the elections, traders should avoid jumping to conclusions about Federal Reserve policy, inflation, and growth trends just yet. While Trump’s policies could lead to higher inflation, this does not necessarily mean he will be able to implement them all at once. Timing will be crucial. Therefore, it’s important to let the election dust settle before drawing conclusions about the duration of the market reaction.

DXY higher across the board

The US Dollar surged due to concerns that inflation might rise during Trump’s presidency, potentially influencing the Federal Reserve to adjust its policy in the future. However, it is still too early to determine.

The Index is currently trading near the 105.75 resistance level, which should be watched carefully. A break above this resistance could lead to further gains towards 106.0 for now.

Gold profit taking underway

Despite all the discussions about Trump’s policies being inflationary, gold prices dropped by nearly $100, reaching a low of $2,655 due to profit-taking. The recent rally in gold prices was a clear indication that investors were anticipating a Trump win. Today’s movement is commonly referred to as “buy the rumor, sell the fact.”

Additionally, a weekly close below $2700 could lead to a medium-term correction lasting several weeks, with the potential to retest $2600.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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