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Growing Popularity Kamala Harris Under investigation And this possibility The Fed is about to cut interest rates They are dealing a serious blow to what is called the “Trump trade.”
In the 11 days since President Joe Biden announced he would not seek re-election, A strategy that benefits from victory Donald Trump They have lost their power. The dollar stagnated, treasuries rose, and Bitcoin fell.
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Professional and critical journalism practice is a fundamental pillar of democracy. That is why it troubles those who think they are in possession of the truth.
Now the polls show Harris and Trump tie in swing or key statesIt was a stark reminder of the risks of betting on political events. It comes weeks after an assassination attempt and doubts about Biden’s age helped Trump and his proposals for looser taxes, higher tariffs and less financial regulation.
Kamala Harris adopts ‘brotherhood’ concept to appeal to young and progressive votes
“We’re seeing some of Trump’s actions unraveling,” he said. Neeraj Seth“There will be some comings and goings until the election on Nov. 5,” BlackRock’s Asia-Pacific fixed-income strategist said Thursday on Bloomberg TV.
Beyond the election prospects, the Fed chairman Jerome Powell acknowledged this week that the central bank may cut interest rates in September. It also spurred buying of Treasuries and selling of dollars. That would upset Trump, who recently told Bloomberg Businessweek that cutting rates weeks before the vote was something banks “knew they shouldn’t do.”
Here’s what Bloomberg strategists said…
“It’s a lesson for investors about how quickly the political landscape can change. It’s more likely, especially as the Fed prepares to cut rates at its next meeting, that “Business related to US politics is suspended until the end of September.”
– Garfield Reynolds, Bloomberg News strategist.
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Bond markets are focusing more on monetary policy than the election. Treasury bonds rise for third straight month in JulyIt was the longest winning streak in three years following Powell’s speech on Wednesday.
Trump trade war: Republican return to White House could lead to Cutting taxes will increase the national debt, Weakened interest in long-term government bonds.
However, betting on a steepening interest rate curve remains a good bet as the Fed shifts toward rate cuts. This would support a move known as a “bull steepener,” where Short-term Treasury bonds have seen higher gains than longer-dated bonds.
BlackRock’s Seth believes that Fed policy over 12 to 18 months is “more important” than trying to guess the election.
“There’s no doubt we’re entering a relaxation cycle,” he said.
Dollar
The dollar index has been stagnant since Biden dropped out of the race.
Some traders are betting that the dollar will appreciate around the time of a Trump victory, first because of demand for refuge and then because of trade tariffs.
However, they did not expect Trump to say last month that a very strong dollar was a “huge burden” on American businesses. In addition, he chose Ohio Senator Cyrus Vance as his running mate, who has similar views on the strength of the dollar currency.
About two-thirds of respondents to a Bloomberg MLIV Pulse poll from July 22 to 26 expected A second Trump term would weaken the dollar’s status as the world’s reserve currency. Still, 26% think the yuan is the best refuge from volatility if it wins.
Given these contrasting visions, the Fed’s shift will be the most important driver of the dollar going forward. The Bloomberg Dollar Spot Index had its worst day in more than two months on Wednesday after Powell confirmed a bias toward monetary easing.
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Shares of prison operators GEO Group Inc. and CoreCivic Inc. would benefit if the Republicans win big, given Trump’s hard-line stance on immigration.
But they have dropped in the rankings since Biden dropped out of the race.
In contrast, gun stocks such as Smith & Wesson Brands and Sturm Ruger & Co. have performed well so far.
Bank stocks, which could benefit from looser regulation under a Trump administration, have retained most of their July gains.
Meanwhile, shares of Truth Social’s parent company, Trump Media & Technology Group Corp, have plunged 18% since July 21.
China Risks
Despite Trump’s rhetoric against China, the yuan traded offshore gained 1% against the dollar in July, its best performance since November. The recent gains are partly due to gains in the yen as the two currencies move increasingly in tandem.
Investors agree Regardless of who wins the election, Chinese assets remain at riskthough they would do worse against Trump. The former president proposed a 60% tariff on imports from China and a 10% tariff on imports from the rest of the world.
Harris is likely to continue taking national security and industrial policy measures targeting the world’s second-largest economy.
Cryptocurrency
Bitcoin has fallen in recent days as Trump’s approval ratings have fallen. The cryptocurrency has become a barometer of Trump’s chances of returning to the White House, especially after he pledged to make the United States the “crypto capital of the planet and the Bitcoin superpower.”
Shares of Coinbase Global Inc., Marathon Digital Holdings Inc. and Riot Platforms Inc. have also fallen since Biden dropped out.
Arca COO Kyle Doane said bitcoin’s recent weakness could be partially due to Harris’ “rising popularity in the polls.”
Translated by Eduardo Thomson.
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