On Monday, the 'Trump trade' was in full swing, with the dollar, cryptos, and US stocks all experiencing significant gains. This rally is clearly related to the shooting of Trump and the market's expectation of his increased chances of winning the election. However, according to analysts at Morgan Stanley, the negative impact of this event may be even more far-reaching in the long term. In terms of product structure, the operating incomes for products with 10-30 billion yuan were 401/1288/60 million yuan, respectively.
According to Caixin News on July 16th (Editor Maran), the aftermath of the gun attack on Trump is still spreading. On Monday, assets such as the US stock market, cryptos, and the dollar rose due to the expectation of Trump's increased chances of winning the election. Many investors call this phenomenon the 'Trump trade.' However, in a report, Morgan Stanley pointed out that Monday's rebound does not necessarily mean that everything is alright. Historical experience shows that political violence in democratic societies will be extraordinarily detrimental to the market.
Morgan Stanley warns that if the political violence in the US continues to develop, foreign investors will shy away from the US. From an outsider's point of view, the US is no longer a suitable place for investment and entrepreneurship. Wizman warns that bond prices typically skyrocket during periods of political unrest because investors flock to them as a relatively safe asset. Thierry Wizman, the global forex and rate strategist at Morgan Stanley, cites several examples, including the leaden years in Italy from the late 1960s to the mid-1980s and the Northern Ireland issue from the 1960s to 1998, when long-term and continuous political conflicts ultimately led to malignant consequences of reduced investment, loss of talent and a decline in tourism. If political violence continues to develop in the US, it would obviously lead to a similar outcome. Political violence will not only harm the economy but also destabilize the international security and legal framework.
During Italy's leaden years, terrorist incidents from both the extreme left and the extreme right occurred frequently, including multiple bombing incidents in 1978, as well as the kidnapping and assassination of then-Italian Prime Minister Aldo Moro. The Northern Ireland conflict manifested itself as a fierce guerrilla war between Protestants and Catholics, which claimed the lives of as many as 3,600 people. In a political turmoil period, bond prices usually soar because investors flock to them as a relatively safe asset.
Wizman warns that if the political violence in the US continues to develop, foreign investors will shy away from the US. From an outsider's point of view, the US becomes no longer a suitable place for investment and entrepreneurship. If the political violence in the US continues to develop, it will obviously lead to a similar outcome. Political violence will not only harm the economy but also destabilize the international security and legal framework.
Wizman further warns that if political violence continues to escalate in the US, it will lead to a similar outcome. Political violence will not only affect the economy, but will also destabilize the international security environment and legal framework. He warned investors that bond prices usually soar during political turmoil periods because investors flock to them as a relatively safe asset.
Negative results in the long term
Wizman points out that as the world's largest economy, if the political violence problem in the US cannot be resolved, its impact on the global economy will be far greater than Italy's leaden years and the Northern Ireland conflict in the UK. Economic damage is just one aspect; the system of international security and international law would also become far from stable.
On the other hand, investors have long expected Trump's rise to power to accelerate inflation, as his promised policies to reduce corporate taxes and tariffs are effective stimuli for inflation. Wizman added that political violence could also exacerbate the inflation risk in the US.
He also warned that during political turmoil periods, bond prices usually soar because investors flock to them as a relatively safe asset.
On Monday, the US 2-year Treasury yield rose to roughly the same level as the 30-year Treasury yield, reaching around 4.46%. However, Wizman believes that this is mainly due to the market's expectation of Trump's increased chances of winning the election, and does not reflect the factor of political violence.
Last weekend, current US President Biden made two national speeches emphasizing the importance of unity. After the attack, Trump also called for unity, saying that Americans need to show their true character more than ever.