Source: MEGA WAVE

Author: Xiao Luyu

Those who invested in Trump politically are now able to publicly enjoy the fruits of victory.

Susan Wells, the unsung hero of Trump's campaign team, has been appointed as the White House Chief of Staff, while a Fox News host with the highest military rank only as a platoon leader has been nominated as the Secretary of Defense. Elon Musk has indeed become the head of the newly established Department of Government Efficiency (DOGE), becoming a "minister-level entrepreneur," even publicly interfering in the nomination of the new Secretary of the Treasury, which has begun to cause some dissatisfaction within Trump's team.

A new political and economic alliance has emerged on the US political scene, beginning to dominate various domestic and foreign policies of the country.

On November 16, the Ukrainian side announced the negotiation conditions with Russia, stating that at a critical moment when Trump wins the US presidential election and Russia makes progress on the battlefield, Ukraine should make every effort to ensure that the war ends "through diplomatic means" next year.

These previously unheard-of events seem to indicate the same phenomenon: Trump's soaring influence is rapidly changing the political and economic ecology of Europe and the USA over the past few decades.

The slogans proposed during the campaign, whether to end the Russia-Ukraine war, increase tariffs, or expel illegal immigrants, all have a greater chance of being realized quickly under the new situation.

The capital markets globally have also begun speculative trading in anticipation of Trump's victory.

In fact, many people are already eager to invest in Trump's 'comprehensive victory', even though he has not officially taken office yet. Moreover, these traders do not bother to consider how other major countries in the world will respond or counter Trump's series of actions, and what unexpected results may ultimately arise.

In summary, it’s 'won again'.

USD vs Gold.

The battle for dominance between gold and the usd.

Under the expectation that the Russia-Ukraine war will soon come to an end, gold experienced a sharp decline, with COMEX gold down 4.62% last week, and silver down 3.47%.

At the same time, U.S. Treasury yields and$USD (USDindex.FX)$The dollar continues to surge and has returned to the level of October last year, ignoring the impact of the two interest rate cuts by the Federal Reserve this year.

The market is worried that the USA's tax cuts and high tariff policies are causing investment to flow back to the USA, while tariffs on imports will strengthen the dollar and weaken gold and silver.

Under such circumstances, the net long positions of gold etf and futures speculation have decreased, with funds showing obvious profit-taking operations, putting further pressure on the gold market.

In fact, the most steadfast holders of gold are not various investors but the central banks of different countries.

In 2022 and 2023, global central banks and sovereign institutions increased their holdings of gold by 1,082 tons and 1,037 tons respectively, accounting for 23% of the global gold demand for those years, which is significantly higher than the average increase of 473 tons from 2010 to 2021 (making up an average of 11% of annual gold demand).

Since the beginning of this year, the increase in gold holdings by global central banks has continued to rise, reaching 26% of the gold demand during the same period, highlighting the strategic allocation value of gold and also answering why gold can rise 26% this year, performing outstandingly among all major asset classes.

Among various countries, china is one of the countries with the most significant increase in gold holdings by central banks in recent years. From November 2022 to April 2024, the People's Bank of China increased its gold holdings for 18 consecutive months, accumulating 327 tons, accounting for 15% of the total increase by global central banks and sovereign institutions during the same period.

The increase in gold holdings by the central bank of china mainly stems from considerations regarding the internationalization of the yuan, diversification of foreign exchange reserves, and asset safety, or more straightforwardly, the desire to completely decouple the yuan from the dollar.

From the exchange rate alignment in 1994 to the "7·21" exchange rate reform in 2005, the yuan's exchange rate transitioned from being pegged to the dollar to being determined by market supply and demand along with a basket of currencies. By July 2016, the yuan had, in institutional terms, decoupled from the dollar.

Although the US dollar credit system still dominates global exchange rate fluctuations, this old system is gradually weakening.

In recent years, the US government has maintained a huge fiscal deficit for a long time, the debt scale continues to expand, and issues related to the debt ceiling have frequently arisen, forcing international rating agencies like Fitch to downgrade the credit rating of US Treasury bonds. This directly reflects market concerns about the fiscal condition and repayment capacity of the USA.

Even US allies are considering reducing their holdings of US Treasury bonds and seeking other safe assets, which has pushed up the benchmark price of gold.

The international credibility of the dollar is also declining. On one hand, the Federal Reserve's algo easing and aggressive interest rate hikes have caused severe fluctuations in global financial markets; on the other hand, the frequent use of financial sanctions by the US in geopolitical conflicts has led some countries to increasingly want to accelerate the process of de-dollarization.

After Trump's re-election as president, the expected tax cuts and wide fiscal deficits will likely increase the credit risk of US Treasury bonds and overdraw the credit of the dollar.

Therefore, from a medium to long-term perspective, with Trump's return to power, inflationary factors and credit factors will instead become the key to supporting gold's continued strength. After all, gold has always been the most ideal tool for hedging against risks and inflation. If Trump brings about an economic recession, it would also be bullish for gold.

The rich vs regulation.

The chaotic carnival of cryptos.

The performance of cryptos after Trump was elected is also worth pondering.

$Bitcoin (BTC.CC)$On November 13, it broke through a historical high of $93,400, rising about 35% compared to before the election results. According to Santiment data, bitcoin investors achieved nearly $8 billion in profits within 48 hours before and after Trump's election, marking the highest level since October 9.

Other cryptos also performed well, such as the one promoted by Musk.$Dogecoin (DOGE.CC)$Since the US election day, its price has risen by 153%. On the day Trump announced that Musk would be in charge of the Department of Efficiency, dogecoin ignored the general correction in the crypto market and continued to surge, temporarily rising over 19%.

In fact, whether Trump or Harris is elected, those in the crypto industry are confident of welcoming a new bull market. This is because, unlike a few years ago when candidates were more eager to regulate and control cryptos, this year there has been a surge in the number of people supporting crypto, with Trump being the most prominent among them.

Trump will undoubtedly bring an unprecedented relaxed regulatory environment for cryptos, as he plans to fire the current SEC chairman Gary Gensler, who is known for his tough stance on cryptos.

At the same time, Trump will increase investment in the electrical utilities sector to reduce mining costs, support crypto mining activities, and promote the sustainable development of the industry. In the USA, where electricity is expensive and often shortages occur, the electricity demand of cryptos seems to take priority over that of residents.

Meanwhile, some people, including Bill Gates, are eager to invest in nuclear power, as the USA seems to view nuclear power as an important driving force to solve electrical shortages and support the development of cryptos.

The 0.21 million bitcoins held by the US government are also seen by Trump as a strategic reserve policy, and he has vowed not to sell these bitcoins during his term.

Trump's various statements as President of the USA have greatly reduced the potential bearish factors anticipated in the crypto market, while his identity as a businessman allows him to benefit from the crypto market.

According to media reports citing sources, Trump's social media company is in deep negotiations to acquire the crypto trading platform Bakkt. Boosted by this news, Bakkt's stock soared by 162.46% by the end of Monday, and the stock price of Trump's media and technology group rose by 16.65%.

Earlier, Trump began promoting the new crypto business founded by his long-term business partner World Liberty Financial, allowing him to earn considerable fees from it.

Even though Trump's policy intention is to ensure that 'the USA becomes the global center of cryptos' and maintains 'America's leadership position in the international crypto space,' cryptos do not exist solely based on the USA, just as the capital that was born in the USA is not entirely under US control.

An interesting phenomenon is that the more support there is for cryptos in the usa political arena, the lower the correlation seems to be between cryptos and us stocks. In 2024, the correlation between bitcoin and the nasdaq index is only 52% in the same direction, and the 30-day correlation has dropped to 0.46, one of the lowest levels in the past five years, while the correlation with gold prices is stronger.

In other words, both cryptos and gold are seen as "high-quality alternatives to us assets" by investors. However, can cryptos, which are an expensive toy controlled only by a small group of people, really represent the interests of ordinary americans as "us assets"?

Inflation vs recession

The stock market is trading amid expectations of divergence.

Whether it's the Department of Efficiency or $Dogecoin (DOGE.CC)$And$Tesla (TSLA.US)$Stocks; the profits Elon Musk gained shortly after Trump's victory have made many Americans feel complicated.

Since the beginning of this year, Tesla's performance in the capital markets has not been great. Wall Street analysts once stated that Tesla should be removed from the "big seven" stocks and replaced by Netflix, which better fits the AI concept. However, after Musk publicly supported Trump's campaign, Tesla's stock price began to rise significantly.

On November 6, after Trump's victory, Tesla's stock rose by more than 40%, and as of the market close on November 15, it still had an increase of nearly 30%. Wall Street's and the short institutions' attitudes towards Tesla have also undergone a significant change.

Tesla is expected to benefit from several policies after Trump takes office: first, Trump plans to eliminate electric vehicle subsidies, which have mostly flowed to Tesla's competitors, Ford and GM; second, Trump's tariff policy may curb the entry of affordable electric vehicles from overseas into the U.S. market, which will benefit Tesla's sales in the U.S.

Third, media reports have revealed that the Trump administration plans to relax regulations on self-driving technology, prioritizing the "construction of a federal framework for fully self-driving cars" as one of the goals of the U.S. Department of Transportation. If new regulations make fully autonomous vehicles possible, it will undoubtedly be a major bullish factor for Tesla.

The changes in Tesla's and the large cap stocks' trends can, to some extent, be seen as a prediction of the effectiveness of Trump's policies after he takes office: namely, that loose regulations, increased tariffs, and expanding government debt will only lead capital and money to flow more toward the rich, who are already well-off.

As for ordinary Americans, they will face one of two risks: worsening inflation or economic downturn.

Trump plans to make the existing tax cuts permanent and further reduce personal income tax and corporate income tax. In the short term, tax cuts may increase disposable income for ordinary people and improve their consumer ability. However, in the long term, the increased fiscal deficit caused by tax cuts may drive up inflation, thereby increasing the cost of living.

Trump's tariff policy also cannot fundamentally solve the issue of the US trade deficit; instead, it will raise the prices of imported goods and increase the burden on American households. It is estimated that each American family may incur an additional annual expense of more than $1,500 due to tariff policies, significantly increasing the living pressure on ordinary people.

Trump's idea of expelling illegal immigrants aligns most closely with public opinion in the USA and will bring some jobs back to Americans. However, immigrants have always been an important source of labor in low-end service industries, and reducing immigration will likely lead to labor shortages in these industries, further raising labor costs and prices in the USA.

Aside from inflation, an economic recession is another potential outcome since Trump took office. Trump's protectionist trade policies may cause companies to face higher import costs and export barriers, suppressing their investment generation activities in the USA. Large-scale tax cuts and increased government debt may also affect capital confidence, opting for outflow.

Inflation or recession, opportunity or danger, everything is filled with uncertainty.

Trump's governance philosophy has always been quite different from the mainstream global understanding, and now with a second election victory and holding substantial power, he possesses the ability to implement these 'outlier' ideas, plunging the whole world further into the illusion of uncertainty.

Many investors daring to bet on Trump's 'total victory' in such situations are not necessarily believing in Trump himself, but rather continuing to have faith in the USA, binding themselves even tighter to this large ship.

Editor/Rocky