Trump has almost secured victory, with the Republicans likely to control Congress. As of 4:00 am Eastern Time on November 6th, Trump leads in all seven swing states, with the Republicans likely to control both the Senate and the House of Representatives in Congress. Such a significant lead indicates that the political spectrum in the USA has shifted to the right, with the Republican political influence increasing, and American society may shift from 'pursuing fairness' to 'pursuing efficiency'.

What are the upcoming important timelines and variables? From November to December, it will enter a new presidential transition period. Trump can use this time to form his cabinet, streamline personnel and systems. Trump's inaugural speech on January 20th next year and a series of executive orders that may be issued from late January to early February are important windows to observe Trump's governance direction. Of course, there may still be two variables in the election: first, if Harris does not accept the election result, it may lead to the election result being delayed until December 11th; second, if the Republicans fail to win the House of Representatives, Trump's policy space will inevitably be constrained, but currently, the probability of this scenario is extremely low.

Forecast of Trump's governance rhythm: Anti-immigration and tariff policies first, followed by tax cuts and industrial policies. Firstly, anti-immigration policies may be prioritized as an economic stress test and left room for maneuver, and Trump can also shift the conflict to the Democratic government. Secondly, the tariff policy may come into play, but the actual implementation time is still unknown. Historically, a period of more than six months is usually reserved for investigation, negotiation, and discussion, rather than immediate action. The impact of tariffs on US inflation and domestic exports will only be seen after implementation. Thirdly, the introduction of tax cuts policy may come later than the first two major policies. The Republican Party's platform indicates that with the increase in tariff revenue, the policy of tax reduction will naturally follow, implying that tariffs may come before income tax reductions. Fourthly, driving energy supply release, but the implementation path is uncertain. If Trump takes office, it is highly likely that he will intensify traditional energy development, relax regulations, and reverse the clean energy policies introduced during the Biden administration, but the implementation effect remains to be seen.

What impact will Trump's election have on asset prices? In the short term, due to the waning of the 'Trump trade' in the past two weeks, the short-term 'Trump trade' is still expected to continue after the Republican Party's overwhelming victory, and there may still be uncertainties in the election, leading to increased market volatility. In the medium term, assets that have been overpriced due to the 'Trump trade' are expected to see a reversal, but assets that have not been priced for the 'Trump trade' may not necessarily experience significant fluctuations. The US bond yields have already factored in the expectation of inflation constraints on interest rate cuts after Trump's election, with greater downside risks than upside risks; US stocks and the US dollar have fully taken into account the positive effects of Trump's election, but we expect that the policy rhythm is more likely to involve tariffs before tax cuts, so the probability of US stocks and the US dollar rising first and then falling is not low, especially for higher-valued US stocks; Gold is more affected by uncertainty, and after the dust settles on the election, the elimination of uncertainty premium may lead to an adjustment in gold prices. However, in the medium term, whether the core inflation rises or the real interest rates fall is likely to drive gold further; This round of domestic export chains and bulk commodities has not priced in too much of the 'Trump trade', as there is uncertainty in the scale and timing of tariff and industrial policies, which are far from being implemented at the moment, so the overall trending market still needs to wait for clear changes in policy expectations.

In addition, based on the capital bets of the two candidates in this round of elections, the Republicans represent not only traditional fields such as banks, real estate, energy, and manufacturing, but also include medical and high-end technology industries. Harris, on the other hand, is endorsed by the internet, media communications, Wall Street, and environmental protection organizations, and the differences between the two may also imply a long-term shift in the style of the US stock market.

1. The Republican Party once again takes office, moving the political spectrum in the USA to the right.

(1) Trump has almost secured victory, with the Republicans likely to control Congress.

Trump has almost secured victory. Due to the stable base of both parties, Trump has locked in 219 electoral votes, while Harris has locked in 226 electoral votes, so the outcome hinges on swing states. As of 4 a.m. on November 6th Eastern Time, Trump is in a commanding lead in all 7 swing states, with 5 states having counted over 90% of the votes. Trump and Harris have a total of 266 votes to 219 votes, with Trump needing confirmation in just one swing state to secure victory. Trump also announced his victory in the 2024 presidential election at the same time. In Congress, as of 4 a.m. on November 6th Eastern Time, the Republicans and Democrats have secured 199 and 187 seats in the House of Representatives, and 51 and 42 seats in the Senate respectively. This indicates that the Republicans are likely to control the Senate and possibly the House as well. Such a significant lead suggests that the political spectrum in the USA has shifted to the right, with the Republican political influence rising, indicating a shift from pursuing fairness to pursuing efficiency in American society.

What are the important milestones and variables to follow next?

Barring any unexpected events, the next 1-2 months are crucial for observing Trump's new policies. Following the normal timeline, after the election results are confirmed (exact timing unknown), Trump will make his victorious speech. The transition period for the new President will take place in November and December, where Trump can use this time to form his cabinet, streamline personnel and systems. We will continue to monitor the nomination of officials. The congressional oath of office and the new president's inauguration will take place on January 3rd and January 20th respectively. Trump's inauguration speech and a series of possible executive orders from late January to early February will be important windows to observe Trump's governing direction.

Of course, there may still be two variables in the election. First, if Harris does not acknowledge the election results, it may lead to a recount and litigation process. According to the 2022 Election Reform and Presidential Transition Improvement Act, both campaign teams will initiate transition plans, which will inevitably trigger greater social unrest. Under current law, the Supreme Court will rule on all election disputes by December 11th. Second, if the Republicans fail to win the House of Representatives, Trump's policy space will inevitably be constrained. Currently, the probability of this scenario is very low.

Trump's governance rhythm projection: anti-immigration and tariff policies first, followed by tax cuts and industrial policies.

The core appeal of Trump's policy is to support tax cuts and manufacturing reshoring through tariff revenues, but it needs to offset potential inflationary pressures through releasing energy supplies to suppress oil prices. Considering Trump's significant autonomy in trade and anti-immigration policies, which can be achieved through presidential executive orders without the need for congressional legislation, the following policies are likely to be on the agenda by 2025:

Firstly, anti-immigration policy may be prioritized as an economic stress test. Throughout his previous and current term, Trump has maintained a consistently firm stance on immigration issues. Given the large number of undocumented immigrants currently in the U.S., this round may see stricter anti-immigration policies, including large-scale deportations, border wall restoration, and accountability for illegal immigrants. Immigration outflows are likely to impact the U.S. job market and inflation, and we believe that anti-immigration policy may be the first policy implemented to test the pressure and leave room for maneuvering, with Trump potentially shifting blame to the Democratic government.

Secondly, tariff policy may be on the agenda, but the actual timing of implementation remains unknown. If Trump takes office, he is likely to invoke Sections 122 of the 1974 Trade Act and 232 of the 1962 Trade Expansion Act to investigate trade actions against China and other economies, eventually imposing tariffs. However, historically, a period of over six months is usually reserved for investigations, negotiations, and discussions before any tariffs are imposed, and the drag of tariffs on U.S. inflation and domestic exports will only be felt after implementation.

Third, the introduction of tax reduction policy may be later than the first two major policies. The Republican Party Manifesto points out that with the increase in tariff revenue, the tax reduction policy will naturally be implemented. We believe this implies imposing tariffs first before reducing income taxes. The previous round of Trump tax reform will expire in 2025. Trump has repeatedly expressed his intention to make the tax cuts permanent. It is expected that the Trump team may first introduce a new version of the tax reduction plan, followed by internal negotiations within Congress, and the implementation may be around the end of 2025.

Fourth, driving energy supply release, but the path to achievement is uncertain. If Trump takes office, it is highly likely that there will be an increase in traditional energy development, relaxed regulations, and a reversal of the clean energy policies introduced during Biden's term. However, the actual implementation will depend on the exchange of interests between Trump and the top shale oil companies in the US. The specific implementation method remains to be verified, and oil prices are also influenced by factors such as OPEC's supply strategy and the US economy, making the impact path quite complex.

Third, what impact does Trump's election have on asset prices?

(I) In the short term, overseas markets are expected to continue the Risk-on trend

Due to the recent decline of the 'Trump trade' in the past two weeks, the short-term 'Trump trade' is still expected to continue after the Republican Party's major victory. Referring to the experience of the previous round, the 'Trump trade' not only appeared in November and December 2016 after the victory, but also in late January to early February 2017 after Trump intensively issued various executive orders, and again after the initial draft of the tax reduction bill was announced in April until the tax reduction bill was implemented in December, overseas markets also experienced multiple Risk-on occurrences. In other words, the market will repeatedly experience fluctuations in 'Trump trade' based on changes in policy expectations, and market volatility may increase.

(II) In the medium term, assets overpriced with the 'Trump trade' are expected to undergo a reversal

In the medium term, assets overpriced with the 'Trump trade' are expected to undergo a reversal, but assets not priced with the 'Trump trade' may not necessarily experience significant fluctuations. From the recent market performance, US bond yields have factored in the expectation of inflation constraints on interest rate cuts after Trump's election, with downside risks greater than upside risks; US stocks and the US dollar have fully priced in the positive impact of expansive fiscal policies after Trump's election, but we expect that the policy rhythm is more likely to be the imposition of tariffs before reducing taxes. Therefore, the probability of US stocks and the US dollar rising first and then falling is not low, especially for higher-valued US stocks; Gold is more influenced by uncertainty, and after the dust settles on the election, the uncertainty premium may diminish, leading gold to possibly undergo adjustments. However, in the medium term, whether it's the uptick in inflation expectations, or the decline in real interest rates, both may drive gold to strengthen further; This round of domestic export chains and csi commodity equity index has not priced in the 'Trump trade' too much, because of the uncertainty about the scale of tariffs and industrial policy implementation times, so a trend-oriented market still needs to wait until there is a clear change in policy expectations.

In addition, based on the capital bets of the two candidates in this round of elections, the Republicans represent not only traditional fields such as banks, real estate, energy, and manufacturing, but also include medical and high-end technology industries. Harris, on the other hand, is endorsed by the internet, media communications, Wall Street, and environmental protection organizations, and the differences between the two may also imply a long-term shift in the style of the US stock market.

Risk warning

The U.S. election situation exceeded expectations, as did the U.S. economic and monetary policy.

This article is from the "CMC Macro Silent Thoughts" public account, edited by Zhongtong Finance and Economics: Jiang Yuanhua.