Locking in the victory of the usa presidential election in advance, Trump resumes trading, with the three major us futures indices all soaring on Wednesday, the us dollar and us bond yields surging, and bitcoin showing strong growth.

All of these reactions are consistent with Trump's promises: cutting corporate taxes boosts US stocks, imposing tariffs leads to a strong usd, expanding the fiscal deficit means rising us bond yields, and relaxed regulations help banks and bitcoin rise.

However, in the long run, whether these subconscious market reactions are correct is another matter. Renowned financial commentator and Wall Street Journal reporter James Mackintosh pointed out in an article on Wednesday that there are four major questions worth investors' attention:

Is there still uncertainty about whether the Republican Party can control the House of Representatives;

Trump's immigration and tariff policies have a negative impact on the US economy;

Compared to Trump's first term, US stocks are already very expensive;

Will traders repeat the mistakes of 2016 and bet against the market trend after Trump takes office.

First, there is still uncertainty regarding the House of Representatives election.

The Republicans have regained control of the Senate, Mackintosh believes that if they further control the House of Representatives, this will clear some obstacles for Trump to fulfill his promises.

Conversely, without enough support to reduce taxes or increase spending, the commitment to improve the fiscal deficit by raising tariffs actually amounts to a significant increase in taxes. This approach will raise doubts about the logic of the increase in US bond yields.

On Wednesday, the 30-year US bond yield rose by 23 basis points at one point, marking the largest single-day increase since 2020. This indicates that the uncontrollable fiscal deficit in the United States will continue indefinitely.

Secondly, the impact of Trump's two major policies - immigration and tariffs - on the US economy.

Firstly, the immigration policy. If Trump fulfills his promise to deport millions of illegal immigrants, this may cause a huge supply shock in the US labor market, potentially reversing the trend of labor market cooling, which is akin to putting the Fed on the hot seat regarding interest rate cuts.

Mackintosh stated that a return to labor shortages in the job market implies upward inflation and slowed economic growth, which is not good news for US stocks. Moreover, renewed concerns about inflation may push up US bond yields, which is also unfavorable for US stocks.

As for the commitment to high tariffs, it has had a textbook effect on boosting the US dollar. The Bloomberg Dollar Index hit a one-year high, while foreign currencies such as the Euro, Korean Won, and Mexican Peso all fell. Analysts believe that if Trump continues to implement comprehensive high tariffs, the US dollar may receive even stronger support.

Mackintosh believes that a possible consequence is that Trump's imposition of tariffs may trigger a full-scale trade war, which could partially offset the positive impact on the dollar. Due to the huge trade deficit in the USA, the losses from the trade war may be smaller for the USA than for other countries.

Nevertheless, the consequences of the trade war will be mutually detrimental, affecting US economic growth and possibly suppressing US stocks and lowering US bond yields - contrary to market assumptions.

Third, compared to Trump's first term, US stocks are already very expensive.

The current PE ratio of the S&P 500 index is 22 times, compared to 16 times for the S&P index in 2016.

Similarly, the 10-year US Treasury yield is 4.4%, compared to 1.8% in 2016, the ICE dollar index is 105, compared to 97 in 2016.

Therefore, as Mackintosh points out, investors will harm the markets above as long as they are slightly disappointed with the direction or speed of Trump's policies.

Fourth, for the market since Trump took office, have traders filled in the wrong answers?

In this election, beware of deviations in traders' bets. Taking a lesson from history, during the 2016 election, traders were completely wrong at least twice in their predictions about Trump.

After Trump unexpectedly won, the US stock futures saw a massive sell-off, hitting the limit overnight with a 5% decline. Now it seems that this was a completely wrong bet.

In addition, US bond yields and the US dollar skyrocketed for the rest of the year in preparation for Trump taking office in January of the following year. However, the US dollar plummeted throughout 2017, causing US bond yields and US stocks to fall.

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