Four years ago, after Trump lost his re-election campaign, he said in his last public speech during his term that he would come back in some way. Now that Trump has secured victory and successfully fulfilled his oath, it means that from January 20, 2025, the United States will enter the "Trump 2.0 era."
Since announcing his candidacy, Trump's campaign platform of "Make America Great Again" has focused on many important areas such as manufacturing, taxation, trade, immigration, and the environment. Policy changes often become a watershed for market trends. From the potential of the stock market to the volatility of cryptocurrencies to the trend of the US dollar, the future trends of various assets have been hotly debated, and investors are looking to capture opportunities in the new political cycle.
Cryptocurrency ushers in a new round of rally
Since the end of October, Trump's winning rate on major prediction platforms has been changing, and Bitcoin, the most direct asset of the "Trump transaction", has also been jumping up and down. The fate of Bitcoin and the US election seem to have never been so closely intertwined.
During the campaign, Trump's heart-touching promises and deep interest binding injected a shot in the arm for the further growth of the crypto market. First, Trump promised to take measures to ensure the United States' leadership in the field of cryptocurrency, planned to include Bitcoin in the national reserves, and fired the SEC chairman known as the "crypto killer." Second, Trump himself is deeply involved in the crypto market. Not only has he issued NFTs many times, but he has also frequently promoted tokens issued by his family on social media recently.
Security.org data: 40% of American adults currently own cryptocurrency
In addition, Musk, who is the "number one contributor" to Trump's victory and mentioned the name 11 times in just 3 minutes in his victory speech, is also a supporter of Bitcoin and Dogecoin. During the critical stage of the election, Musk mentioned Dogecoin many times, causing it to soar and now has doubled. Therefore, it can be foreseen that whether it is to fulfill campaign promises, expand family income, or give back to supporters, Trump has enough motivation to introduce policies to boost the crypto market after his election.
The market is actively responding to the potential growth of the crypto market. Within two days of Trump's election, the total market value of cryptocurrencies increased by 14.5% from $2.2 trillion to $2.52 trillion, and related crypto stocks and ETFs in the U.S. stock market were also bought in large quantities. The influence of Trump's policies has begun to be reflected in the market.
Tax cuts support US stock earnings
In Trump's policy blueprint, the U.S. stock market is seen as one of the biggest winners. On the day after Trump's victory, the three major U.S. stock indexes hit record highs, with the S&P 500 index rising 2.5%, the largest increase since election day in history, the Dow Jones Industrial Average rising 3.57%, the largest increase in two years, and the Nasdaq closing up 2.95%. Most technology stocks rose, and Tesla's stock price soared nearly 15% overnight to its highest level since July 2023. Trump media technology, prison stocks, cryptocurrency concept stocks, bank stocks, and energy stocks all rose sharply.
Trump's policies of reducing taxes, emphasizing science and technology, and encouraging fossil energy are all good for the US stock market to a certain extent. In particular, the tax reduction policy will support the profitability of US stock companies and the sustained growth of the economy in the medium and long term. In sectors such as finance and traditional energy, Trump's policies tend to reduce regulations and support domestic mining and the use of fossil fuels, which will have a positive impact on related markets and are expected to outperform the market. Considering that Trump actively supports the development of artificial intelligence and holds a loose regulatory attitude, it also has certain support for the technology stock market.
Data shows that October was one of the months with the lowest volatility in the U.S. election year, reflecting that investors generally reduced their positions to avoid risks before the election. Now that the outcome has been decided, the subsequent increase in positions may help the U.S. stock market usher in a year-end rally. The small and medium-cap sectors of the U.S. stock market, which have lagged behind this year, may perform better than large-cap stocks under the expectation of tax cuts. With Trump's support for the return of manufacturing, U.S. cyclical stocks should also perform well.
However, we need to be vigilant that Trump's policy of drastically increasing tariffs may have a negative impact on the economy and inflation. It is expected that the volatility of US stocks may increase in the future.
The dollar continues to strengthen
Stimulated by Trump's victory, the US dollar index surged nearly 2% during the session on Wednesday, hitting the largest single-day gain in nearly two years and a three-month high. All other currencies were under pressure, with the yen falling more than 1.9% to a three-month low, the offshore renminbi falling to around 7.2 for the first time in more than three months, and the euro falling more than 1.8% to its worst day in more than four years, reaching a four-month low.
With Trump returning to the White House, the dollar is expected to continue to strengthen. Trump's protectionist trade policies and tax cuts may also be actively implemented after he takes office. These measures may push up US inflation. In order to prevent the economy from overheating, the Federal Reserve will maintain high interest rates, further pushing the dollar into a new round of upward cycle, which will hit global currencies, especially emerging market currencies. At the same time, Trump's plan to withdraw from multilateral institutions may curb growth in other parts of the world, thereby enhancing the attractiveness of the dollar.
Gold is favored in the medium and long term
After Trump's victory, the gold market experienced a short-term correction, with spot gold recording its biggest one-day drop in five months the day after the election. Trump's economic policies have raised market concerns about potential inflationary policies, while pushing up U.S. Treasury yields. In addition, the U.S. election results have eliminated market uncertainty, and risk appetite trading has rebounded, thus suppressing the short-term safe-haven demand for gold.
Although gold is under pressure in the short term, the market is still bullish on gold's medium- and long-term trend due to frequent geopolitical conflicts and its anti-inflation characteristics. At the macro level, gold prices are affected by two pricing logics: US inflation and fiscal policy. Rising US inflation will drive gold's appreciation relative to the US dollar; while fiscal logic is reflected in the synchronization of gold prices and the US federal deficit rate, and continued fiscal expansion overdrawing US dollar credit has increased the allocation value of gold. In addition, Trump's foreign policy may lead to further differentiation of the global monetary system and economic cycle, stimulate the process of "de-dollarization", and thus increase gold demand.
From the rise of cryptocurrencies to the boom in U.S. stocks to the strength of the U.S. dollar, investors will face many opportunities in the new administration's political cycle. However, Trump's trade policies and tax cuts also come with certain risks, reflecting the complexity of policies.
Percentage of Trump's first-term promises fulfilled
At the same time, the market is also waiting to see whether Trump's policies can be effectively implemented. According to PolitiFact statistics, 23% of Trump's policies in his first term were fully implemented, such as raising tariffs on goods imported into the United States, restricting illegal immigration, and withdrawing from the Paris Climate Agreement. 22% of the policies were implemented with concessions, that is, some compromises. 55% of the policies were not implemented, such as investing in US infrastructure and restoring US manufacturing. The US election ended with the victory of the Trump camp, and the global market is playing the game of "Trump 2.0 era". Through 4E, investors can keep up with market trends, flexibly adjust strategies, and seize every potential opportunity.
