(Reuters) – A look at the day ahead in U.S. and global markets by Amanda Cooper.
It’s been exactly a month since the U.S. presidential election delivered victory for Republican Donald Trump and his proposed “America First” agenda.
Markets have been driven in large part by the so-called “Trump trade” for the past couple of months – a dynamic that has boosted assets likely to benefit from his pledge to slap tariffs on the imports of major trading partners and slash spending and regulation, with particular emphasis on crypto.
Bitcoin has finally vaulted above the $100,000 mark, having toyed with it for several weeks now, and is pulling all crypto boats higher, as a result.
The market has taken the nomination of deregulation advocate Paul Atkins to run the Securities and Exchange Commission as another green light to pile into crypto.
Ether has risen by 65% in the last month too, but typically, it is the super-volatile memecoins that have scored big. Peanut Squirrel coins, named for an Instragramming squirrel whose death reportedly caught Trump’s interest, has gained nearly 2,500%, while Moo Deng tokens, named after the baby hippo and social media sensation in a Thai zoo, have gained 200%.
Trump’s pick of Tesla chief executive Elon Musk to lead his efforts to cut government spending have lifted shares in Musk’s electric vehicle company by 50% in the last 30 days as well.
With his proposals of big tariffs and tax cuts, Trump has fuelled a rally in the dollar, as investors factor in the likely boost to inflation that these measures could bring.
But these have also powered a rally in U.S. equities to yet more record highs, as investors price in the possible positive impact on growth. One of the side-effects has been a wave of capital flowing into U.S. equities at the expense of share markets elsewhere.
World stocks excluding the United States and its mega-cap companies have actually fallen 0.2% since Nov. 5.
U.S. Treasury yields topped 4.5% in mid-November, as the Trump trade gathered momentum. But as November has given way to December, yields have retreated, falling to around 4.2%, which in turn has knocked some wind out of the dollar’s sails too.
The dollar index, which measures the performance of the U.S. currency against six others, has fallen nearly 4.5% in the last two weeks.
The biggest victims of the Trump trade in currencies – the Mexican peso, the euro and the Chinese yuan, which all stand to take a hit from his proposed tariffs – are starting to recover.
The peso, which fell as much as 2.7% in the wake of the election, has almost broken even, while the euro, for all the headwinds it faces at home on the economic and political front, has recovered some ground too in the last week or so.
Bitcoin and Tesla are still red-hot right now, but as investors approach the year-end, they may be growing cooler towards a big part of the Trump trade.
Key developments that should provide more direction to U.S. markets later on Thursday:
* Initial weekly jobless claims
* October international trade
* Federal Reserve Bank of Richmond President Thomas Barkin addresses Charlotte Regional Business Alliance economic event
(Writing by Amanda Cooper; Editing by Andrew Cawthorne)
