According to the Wisdom Finance app, after US presidential candidate Trump was shot, his leading election support rate increased rapidly, surpassing current President Biden, and the so-called 'Trump trade' seems to gain more momentum. Since Biden performed poorly in last month's presidential debate, boosting Trump's prospects of winning, the 'Trump trade' has become popular. Traders and strategists agree that Trump's election will stimulate inflationary portfolio trades that benefit from loose fiscal policies and greater protectionism - the US dollar will strengthen, US Treasury bond yields will rise, and banks, medical care, and energy stocks will rise.
In the financial market, investors generally believe that Trump's shooting incident may become one of the most important turning points in the US election, fully strengthening Trump's political leadership image, especially in the minds of his supporters, he is regarded as one of America's historical heroes, and some media even compare him to Roosevelt. Even in the eyes of some Republican supporters, Trump, who dodged bullets 'under God's protection,' means that he is the only next president. By comparison, the weaknesses of Democratic opponent - current President Biden, in on-the-spot response, speech logic, and internal support rates, are more prominent.
Tesla CEO Musk made several posts on social media X over the weekend to fully support Trump's campaign for US president after the shooting incident against Trump. In Musk's first post, he, who has not revealed a clear election inclination in the past, said he would fully support Trump.
On Monday's Asian morning, the US dollar rose against most currencies. Bitcoin rose above 0.06 million dollars, seemingly reflecting Trump's friendly stance on cryptocurrencies. The Toronto-Dominion Bank's Global Head of Foreign Exchange and Emerging Markets Strategy, Mark McCormick, said: 'For us, this indeed reinforces the fact that Trump is the leader in the US election.' 'We are still bullish on the US dollar in the second half of this year and early 2025.'
But the risk is that the appearance of political violence may deepen people's concerns about the instability of the US market and push investors into safe-haven assets. For example, when investors temporarily seek safe havens, US Treasury bonds often rebound, which may distort the 'Trump trade' in the US bond market - betting that the US bond yield curve will steepen because people expect Trump's fiscal and trade policies to exacerbate inflation pressures, leading to poor long-term performance of US bonds. In addition, some investors may hope to take profits in advance or be cautious about buying further in already crowded positions.
Morgan Stanley Investment Management's portfolio manager, Priya Misra, said: 'Political risk is binary, difficult to hedge, and highly uncertain.' 'This increases volatility. I think this (shooting incident) further increases the possibility of a Republican landslide. This may bring pressure on the US bond yield curve to steepen.'
Although traders generally believe that the attempted assassination of Trump will not disrupt the trajectory of the stock market in the long run, recent price fluctuations may intensify. Given the prosperity of AI stocks and the risks posed by high interest rates and political uncertainty, the market has been struggling with speculation of overvaluation. At the same time, investors have also been expecting that stocks in the banking, medical care, and energy sectors will benefit from Trump's victory.
Roundhill Investments CEO David Mazza said: 'The shooting incident will increase volatility.' He expects investors to seek temporary safety in defensive stocks such as large caps. He added that this also provides support for stocks that perform well in steep US bond yield curves - especially financial stocks.
Michael Purves, CEO and founder of Tallbacken Capital Advisors, said: 'If the market feels that Trump's chances of winning the election have increased, we expect long-term US bonds to be sold off, just as we saw after the end of the presidential debate.' He said that although bond traders have expected at least two rate cuts by the end of 2024, the greatly increased probability of Trump's election may push the Fed to keep interest rates unchanged for a longer period of time. He said: 'Trump's policies (at least for now) are more likely to cause inflation than Biden's policies.'