Since October, Trump has surged in the polls, leading to a rapid shift in global market sentiment. Trading strategies are gradually switching to bets on the election outcome. As the U.S. election enters its final showdown phase, the market seems to be picking up increasingly clear signals, with "smart money" significantly pricing in a tilt towards Trump.
The market is placing real bets on a Trump victory.
On Tuesday, shares of the well-known "Trump-related stock," Trump Media Group, surged another 8.76% following a 21.59% increase on Monday, bringing the total rise since October to 220.54%. Additionally, the KBW Regional Banking Index has risen by 10% over the past month, significantly outpacing the broader market, reflecting the market's strong confidence in Trump-related assets.
The U.S. dollar and Treasury yields are also showing signs of the "Trump trade." Currently, the dollar index has surged to the 104-105 range, rising for the fourth consecutive week, putting pressure on non-U.S. currencies. The yield on the 10-year U.S. Treasury has rebounded from previous lows to 4.24%, an increase of 48 basis points since the end of September.
Meanwhile, Bitcoin has become one of the core assets of the "Trump trade" due to Trump's support for cryptocurrencies. On October 30, Bitcoin broke through the $73,000 mark for the first time in seven months, just 0.2% away from its all-time high. Data shows that since October, U.S. Bitcoin spot ETFs have attracted over $3 billion in net inflows, indicating strong institutional buying.
Total Net Inflows for Bitcoin Spot ETFs
In recent weeks, the strengthening dollar, rising Treasury yields, and the strong performance of the banking and cryptocurrency sectors—these direct "Trump-related stocks"—have shown robust gains. The market is betting real money on the expectation that Trump will win.
Impact of Trump's Election on Major Asset Prices
As the U.S. election intensifies, expectations for Trump's victory are growing, prompting the market to bet on the potential impacts of his policies on different asset classes. The economic effects of Trump's policies could lead to stark differentiation among major assets, altering the global economic landscape.
- Strengthening Dollar
Trump's policy proposals include raising tariffs and cutting taxes, which are expected to increase inflation expectations. This could make the Federal Reserve more cautious about lowering interest rates, thereby supporting a stronger dollar. Currently, the U.S. economic fundamentals are robust, particularly with high employment rates and moderate inflation, providing strong support for the dollar. It is anticipated that the dollar will continue to strengthen in the global foreign exchange market. - Cyclical and Technology Sectors Likely to Dominate U.S. Stocks
The market is generally optimistic about Trump's potential boost to U.S. stocks. With a relatively strong U.S. economy, Trump's emphasis on tax cuts and deregulation is expected to enhance corporate profits and consumer spending. The cyclical and technology sectors are likely to be key focuses for investors. Supported by macro factors such as fiscal expansion, strong demand in the AI sector, and global capital reallocation, the medium to long-term outlook for U.S. stocks appears more attractive.
Historically, U.S. stocks tend to rise in election years. For example, after Trump's victory in the 2016 election, expansionary policies led to a rapid rebound in the S&P 500, providing a historical reference for this year's U.S. stock trends.
- Commodity Demand May Face Adjustments
Compared to the Democrats, the Republican energy policy tends to support traditional energy industries. Trump's election could lead to a relaxation of restrictions on fossil fuels, promoting the expansion of the oil and gas industry, which might suppress oil prices in the medium to long-term. The likelihood of escalating tensions in the Middle East has diminished, and expectations of declining oil demand due to a slowing global economy could lead to short-term fluctuations and weakness in oil prices.
Meanwhile, the gold market has continued to strengthen at high levels, having already incorporated significant safe-haven and anti-inflation demand within the framework of Trump's policies. This has somewhat diverged from the fundamental support levels based on the dollar and real interest rates. If uncertainty decreases after the election, gold prices may face downward pressure.
- Bitcoin Set for a New Bull Run
The cycle of this year's U.S. election closely aligns with the cycle of Bitcoin. Trump’s favorable stance toward the crypto market, along with his deep involvement in various crypto activities and related products, has generated excitement, especially his declaration to "make Bitcoin a strategic reserve for the U.S." A Trump victory would be highly beneficial for the crypto space, leading to a new bull run for Bitcoin, and the influence of crypto assets in the global market is expected to reach new heights.
Conclusion
The current "Trump trade" is profoundly affecting global asset pricing. Regardless of the final outcome of the election, the global market will face an unprecedented opportunity for asset revaluation.
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