Biden's poor performance in the presidential debate seriously undermined the confidence of his supporters. Traders are all assuming that Trump will return to the White House and that is a basic assumption for the market outlook. If Trump wins, his high tariffs and high threshold trade policies may increase the uncertainty of assets and cause temporary pressure on global risk assets. However, in the long run, US stocks may be stronger, and traditional energy, finance, and other cyclical industries may outperform; in terms of US bonds, trading in short-term bonds and selling long-term bonds is heating up.
The first televised debate of the US presidential election has ended. The poor performance of Democratic presidential candidate Biden has raised concerns among the public about his ability to work at his age, and the sentiment to 'replace Biden' is rising. Conversely, the probability of Republican presidential candidate Trump winning has sharply increased.
Predictlt's data shows that after the start of the first debate, Trump's chances of winning have increased significantly from 53% to 64%, while Biden's have decreased from 48% to 35%. Although both Trump and Biden's support rates have not exceeded 50% as of June 28th according to poll ratings, Trump leads Biden with a support rate of 46.7% (compared to Biden's 44.8%), widening the gap to 1.9%. Therefore, traders are increasingly assuming Trump will return to the White House and start his second term, as the market's basic assumption.
As a former US president, Trump's policies and the performance of major assets under his first term are the focus of attention. Compared to Biden, Trump's policies are more conservative and tough, and are the concentrated expression of 'America First'. In terms of trade policy, Trump implements the 'America First' philosophy, creates great 'trade protectionism', raises tariffs, and also levies 'specific taxes' on certain regions or industries; in terms of tax policy, Trump advocates large-scale tax reductions at home, which benefits the more affluent group; in terms of immigration policy, Trump implements a tough immigration policy, expelling illegal immigrants, and building a border wall along the US-Mexico border; in terms of climate policy, Trump strongly advocates traditional fossil energy and withdrew the US from the Paris Agreement during his term.
In November 2016, Trump's victory exceeded market expectations, and US bonds, stocks, the dollar, and bulk commodities rose while gold fell due to policy expectations. In the first half of the year, with the advancement of policies and digestion of expectations, the US bond and stock markets fluctuated at high levels, while the US dollar and bulk commodity prices fell and gold rose. In the second half of the year, as the tax reform policy strengthened and interest rate expectations heated up, US bond interest rates rose again, gold fell, and bulk and US stocks strengthened.
What does 'Trump 2.0' mean?
From the policies published by the Trump election team currently, the policy of 'Trump 2.0' will be an extension and strengthening of the policies in the 'Trump 1.0' era.
In terms of trade policy, Trump may show a more aggressive posture, dedicated to further strengthening the United States' own abilities, implementing trade protectionism, and even sacrificing the interests of allies to a certain extent. But this measure is expected to be detrimental to economic growth and inflation control: tougher tariff policies will suppress the economy and employment market, in addition to tariffs being completely passed on to consumers, which carries the risk of increasing inflation.
Regarding tax policy, tax reduction was the core of Trump's first term, and is one of the important propositions that attract voters in this election. On the one hand, Trump advocates extending the period of individual income tax reduction, and even promoting permanent tax reduction; on the other hand, Trump proposes to further reduce corporate income tax to 15%. Short-term policies may have a positive impact on the market. It may increase corporate income and profits, and be beneficial to stock prices in the medium term. However, tax reduction is also easily associated with policies to raise tariffs, which can widen the gap between rich and poor, and in the long run, may damage people's purchasing power and drag down economic development.
In terms of immigration policy, Trump advocates continuing to tighten policies on 'low-level' immigrants, but relatively relaxes requirements for 'high-level' talent. Since 'low-level' immigrants generally have high labor demand, the influx of large numbers of 'illegal immigrants' into the US objectively promotes employment and growth. In the long run, reducing immigration may reduce labor supply and consumer demand, leading to slower economic growth.
Regarding climate/energy policies, Trump is more supportive of the return of traditional energy sources, and is expected to expedite the granting of oil and natural gas exploration licenses, increase the development of traditional fossil energy, to ensure the cost advantage of the US in energy and electricity, and will announce another withdrawal from the Paris Agreement.
However, no matter whether it is Trump or Biden, high-tech fields like chips and artificial intelligence will always be the focus of policies. No matter who becomes president, policies and funding support for related industries will only increase, not decrease.
In addition, Trump broke the tradition of not commenting on monetary policy by presidents since the 1990s, and criticized Fed Chairman Powell's currency policy direction many times. At the beginning of this year, in an interview, Trump once again hinted that the Fed is helping the Democrats by controlling the pace of interest rate cuts, which raised concerns in the market about increasing pressure and interfering with the independence of the Fed's monetary policy, which may lead to more market turbulence. Product structures, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.
If "Trump 2.0" comes true, how should investors operate?
If Trump is re-elected and the Republican Party can have an advantage in both the Senate and the House of Representatives, its high-tariff, high-threshold trade policy may increase the uncertainty of assets, cause temporary pressure on global risk assets, and introduce inflation, which may put upward pressure on US bond yields. In terms of industries, Trump favors traditional energy and supports the return of manufacturing to the United States, which is expected to boost cyclical stocks and value stocks. However, support for the technology sector is expected to continue and will not hinder the excellent situation of growth tech. Specifically,
US stocks:
Currently, short-term sentiment and valuation of US stocks are high, so it is best to wait for sufficient callbacks before intervening, that is, "do not buy without falling". In the long run, if Trump is elected, US stock profits may be stronger. Structurally, when the Republican Party wins, traditional energy, finance and other cyclical industries are expected to outperform.
Please use your Futubull account to access the feature."Trump vs. Biden! The U.S. election situation is about to erupt, which stocks are worth betting on?"This article summarizes UBS's research on "Trump's big win concept stocks" list. From this, it can be seen that in addition to the strong correlation with Trump, financial company symbols, and oil company symbols, symbols related to "Made in America" are also expected to benefit.$Trump Media & Technology (DJT.US)$except for technology company symbols that are strongly related to Trump,$JPMorgan (JPM.US)$, $Bank of America (BAC.US)$, $Goldman Sachs (GS.US)$financial company symbols,$ConocoPhillips (COP.US)$, $Exxon Mobil (XOM.US)$oil company symbols,$Ford Motor (F.US)$, $General Motors (GM.US)$symbols related to "Made in America" are all expected to benefit.
US bonds:
If Trump is elected, his tariff policy, tax cut policy and immigration policy are more biased towards inflation, which means that it is difficult for US bond yields to fall significantly. The Republican Party's sweeping situation makes it more difficult to solve the debt ceiling than in 2023. In terms of pace, it is expected that the risk-avoidance sentiment and interest rate cuts brought about by the early elections will push down US bond yields, and later, US bond yields may rise due to re-issuance of bonds and economic data warming up.
Currently, the transaction of buying short-term bonds and selling long-term bonds is heating up. Institutional analysis believes that a series of major policy directions such as Trump's tax cut, tariff increase, immigration restriction, and interest rate reduction tendency may create an environment of loose fiscal and monetary policies, leading to long-term inflation biased to high inflation and high interest rates. Morgan Stanley and Barclays both urged clients to prepare for sticky inflation and higher long-term bond yields under Trump's next term.
For institutional investors with abundant funds and diversified means, buying bonds directly can maximize returns; for ordinary investors, treasury bond ETFs are a cost-effective and worry-free choice. Short-term bond ETF$SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL.US)$, $Short-Treasury Bond Ishares (SHV.US)$, $Schwab Strategic Tr Intermediate-Term Us Treasury Etf (SCHR.US)$, mid-term treasury bond ETF,$iShares 7-10 Year Treasury Bond ETF (IEF.US)$, and long-term treasury bond ETF,$iShares 20+ Year Treasury Bond ETF (TLT.US)$covering various maturity treasury bond ETFs can all be followed.$iShares U.S. Treasury Bond ETF (GOVT.US)$US dollars:
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US dollar:
In the short term, there may be a risk of trading on the high side of Trump's policies, but the subsequent trend depends on the policy impact, whether it will push the dollar weaker from a policy perspective. On the one hand, considering that its policies are more likely to be biased towards boosting growth and inflation, which may lead to higher for longer risk in monetary policy, the dollar may also be more resilient. On the other hand, Trump proposed a "weak dollar" policy, pushing the trend of the dollar to "boost" U.S. exports, which needs to be observed for its possible impact.
Gold:
Trump's election may stimulate expectations, which may be beneficial to risk assets and detrimental to hedge assets, as in 2016. However, trade measures may cause an increase in hedge sentiment, but there is still uncertainty about its geopolitical policy impact on Russia-Ukraine and Palestine-Israel issues. Heraeus, a well-known metal company, stated in its analyst report that the trade war from 2018 to 2020 coincides with the rise in gold prices.
During this period, due to prolonged negotiations, coupled with tariff and geopolitical escalation, investors have sought gold as a hedge asset. The increase in gold prices is closely related to the increase in tariffs. At that time, the amount of gold held by global ETFs increased from 71 million ounces at the end of 2017 to 86 million ounces at the end of 2019, and the amount of gold held by U.S. spot gold ETFs increased from 37 million ounces to 44 million ounces.
In addition, the report expressed doubts about whether the Federal Reserve can maintain its independence after Trump takes office. The analyst pointed out that if Trump appoints several directors who support loose monetary policy to the FOMC, "a more dovish FOMC will accelerate rate cuts, relax control over inflation, weaken the dollar, and increase investors' demand for gold." In any case, "any move by Trump on the Fed may shake market confidence in U.S. monetary policy, further boosting gold prices."
In addition to directly buying and selling physical gold, investors can also pay attention to $SPDR Gold ETF (GLD.US)$, $Gold Trust Ishares (IAU.US)$ETFs such as gold etf.
Commodities:
It is expected that Trump's energy policy proposals will increase the supply of traditional energy, including accelerating the issuance of exploration permits for oil and gas, which may lead to an increase in U.S. oil production. But tax cuts and investment policies may also bring demand boost, so its impact is not a single direction.
Bitcoin:
In May of this year, Trump's campaign team announced that it would start accepting cryptocurrency donations, which was seen as a major example of his goodwill towards the cryptocurrency industry. In early June, Trump met with leaders of several bitcoin mining companies at his Florida resort and expressed his support for cryptocurrencies. Trump said that if he became president again, he would be an advocate for the cryptocurrency mining industry.
Please use your Futubull account to access the feature."The Return of 'Trump Trades'! Will Cryptocurrency Become the Next Investment Hotspot?"An article quoting Bernstein analysts emphasizes that "the Republican side not only sees cryptocurrencies as a pool of voting stocks, but also as a meaningful source of funding. If the election sentiment is more Republican, cryptocurrencies will eventually become the main 'Trump Trades'". Currently, the regulation of bitcoin by the US financial sector is becoming increasingly stringent, and this political orientation is undoubtedly a buffer against an increasingly harsh regulatory environment.
Investors can pay attention to concept stocks such as bitcoin.$Marathon Digital (MARA.US)$, $CleanSpark (CLSK.US)$, $Riot Platforms (RIOT.US)$, $Coinbase (COIN.US)$Investors who prefer ETFs can pay attention to global etf, etc.$iShares Bitcoin Trust (IBIT.US)$, $Fidelity Wise Origin Bitcoin Fund (FBTC.US)$etc.
Data source of the article: CICC, Wall Street News, CNBC
Edited by Jeffrey