Saturday’s shooting at former US president Donald Trump’s election rally raises his odds of winning back the White House, and trades betting on his victory would increase this coming week, investors said yesterday.
Trump was shot in the ear during the rally in Pennsylvania on Saturday in what the authorities were treating as an assassination attempt. Trump, his face spattered with blood, pumped his fist moments after the attack, and his campaign said he was fine after the incident.
Before the shooting, markets had reacted to the prospect of a Trump presidency by pushing the US dollar higher and positioning for a steeper US Treasury yield curve, and those trades could strengthen in the coming week, said Rong Ren Goh, a portfolio manager in the fixed income team at Eastspring Investments Group Pte Ltd (瀚亞投資) in Singapore.
Photo: Reuters
The first shooting of a US president or major party candidate since a 1981 assassination attempt on then-US president Ronald Reagan could upend the Nov. 5 rematch between Republican Trump and President Joe Biden, a Democrat, which has been tight in opinion polls.
“From memory, Reagan went up 22 points in the polls after his assassination attempt. The election is likely to be a landslide. This probably reduces uncertainty,” Vantage Point Asset Management chief investment officer Nick Ferres said.
Immigration and the economy have been the main issues for voters who, according to Reuters/Ipsos polls, see Trump as the better candidate for the economy, even as Biden seeks to benefit from solid growth, slowing inflation and low unemployment.
Under Trump, market analysts expect a more hawkish trade policy, less regulation and looser climate change regulations.
Investors also expect an extension of corporate and personal tax cuts expiring next year, fueling concerns about rising budget deficits under Trump.
That could drive bond selling and potentially add to inflation as interest rates fall, Tallbacken Capital Advisors LLC CEO Michael Purves said in New York.
"If (Trump) wins and does this stuff he said he is going to do, you are going to see a much bigger selloff in the back-end of the bond market,” he said. “I think the bond market is the big (election) trade this year, rather than equities.”
Trump also said in an interview in February he would not re-appoint US Federal Reserve Chair Jerome Powell, whose second four-year term as chair will expire in 2026.
“Trump has always been more ‘pro-market’. The key issue looking forward is whether fiscal policy remains irresponsibly loose and the implication that might have for [renewed] inflation and the future path of interest rates,” Ferres said.
Capital.com senior financial market analyst Kyle Rodda said he was seeing client flows into bitcoin and gold after the shooting. The cryptocurrency advanced after the news broke.
“This news marks a changing point in American political norms and the emergency of greater political violence,” he said. “For markets, it means haven trades, but more skewed towards non-traditional havens.”
Traders would also closely watch market measures of expected volatility today, such as those on the tariff-sensitive yuan, which had begun to price in the US vote.
Stock prices have been rising on Wall Street. Both the S&P 500 and Dow Jones Industrial Average indexes hit record highs on Friday and the S&P 500 is up 18 percent this year.
“Around the five presidential elections of the last 20 years, CEO confidence, consumer sentiment and particularly small business optimism have shifted more favorably in response to Republican victories than Democratic victories,” Goldman Sachs Group Inc analysts wrote.
“To the extent improved sentiment leads to an increase in spending and investment, a Trump victory could boost the earnings outlooks for some firms even without substantial policy changes,” they added.
Additional reporting by Bloomberg
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