World Markets Go Big on Trump Trade After Republican Leader Survives Assassination Attempt

As world financial markets reopened after the attempted assassination of Donald Trump, one thing became clear: the “Trump trade” is back! Beginning early Monday, traders are anticipating a return of the market phenomenon synonymous with the firebrand Republican. The so-called Trump trade involves investment strategies based on expectations that Trump's return to the White House will bring tax cuts, higher tariffs, and looser regulations. This concept started gaining traction after President Joe Biden's poor performance in a recent debate, which hurt his re-election chances.

Rallying Support and Market Impact

Trump's resilience after being shot in the ear during a Pennsylvania rally rallied his supporters and drew sympathy. This defiance boosted the Trump trade, pushing investors to adjust their strategies.

When the markets reopened earlier Monday, watchers noted several key movements:

• Treasuries fell as long-dated bonds underperformed due to expectations of higher inflation from Trump's policies.
• The US dollar edged higher against most currencies.
• Bitcoin rose above $60,000.
• Futures on the S&P 500 Index climbed 0.2%.

Mark McCormick from Toronto Dominion Bank said, “For us, the news reinforces that Trump’s the frontrunner. We remain US dollar bulls for the second half and early 2025.” However, there’s still room for surprises with almost four months to go until the election. In particular, the risk of political violence could push investors towards safer assets, affecting current market positions.

Political Risk and Market Volatility

Priya Misra of JPMorgan Investment Management pointed out that political risk is hard to hedge. The close race and recent events add to market volatility, possibly increasing the chances of a Republican sweep. This could lead to a steepening yield curve, where investors buy shorter-maturity notes and sell longer-term ones.

Indeed, the gap between US two- and 10-year debt widened to minus 24 basis points, the most since January. This steepening is a key element of the Trump trade, reflecting future economic policy expectations.

Sector-Specific Benefits

Certain sectors could benefit significantly from a Trump victory. Investors expect bank, healthcare, and oil industry stocks to perform well. David Mazza from Roundhill Investments predicts that while the attack on Trump will increase volatility, it will also support stocks that do well in a steepening yield curve environment, especially financials.

Long-Term Market Trajectory

In the long run, the assassination attempt might not derail the stock market. However, near-term price swings are likely. The market is already dealing with stretched valuations from the boom in artificial intelligence stocks and risks from high interest rates and political uncertainty.

Michael Purves of Tallbacken Capital Advisors noted that a major boost in Trump's election odds could influence Federal Reserve policies. Trump’s policies are seen as more inflationary than Biden’s, suggesting the Fed might hold off on rate cuts to build up its options.

The Trump Trade is Back, But For How Long?

The Trump trade shows how financial markets are reacting to Trump's potential re-election. As events unfold, investors will need to navigate the associated risks and opportunities. The Trump trade's momentum highlights the intersection of politics and finance, shaping investment decisions in these uncertain times.

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

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