Bassanese Bites: Trumped – November 11 2024
Global markets
Global equities bounced back strongly last week following Trump’s US Presidential victory and the Federal Reserve rate cut. Perhaps surprisingly, long-term bond yields eased over the week though the $US firmed.
My ill-fated foray into political punditry last week met its deserved outcome, with Trump winning the US Presidential election despite my suggestion Harris could win “by a comfortable margin”.
As it turned out, betting markets were not distorted after all and, if anything, understated the probability of Trump winning.
What’s more, my thought there might be more “shy Harris” supporters this time around proved horribly misplaced – moderate Republicans did not flip! Instead, there appeared once again to be more “shy Trump” supporters (or, at least, pollsters did not survey enough of them) especially among a wide range of younger, non-white and non-college educated voters.
Simply put, Trump campaigned on what swing voters most cared about – the economy and immigration, rather than the issues of democracy and reproductive rights that Harris mainly focused on. It was a masterclass in political strategy from Trump – and, in hindsight, Harris/Biden either had to fight and win on the economy or concede and let a new face fight that fight without their legacy.
Either way, the Republicans appear on the brink of a clean sweep, with certain control of the Senate and likely control of the House of Representatives.
Investors are now focused on Trump’s policies, which include market-friendly tax cuts and deregulation, and less market-friendly tariff increases/trade wars. So far at least, equity markets are focused on the positives, helped by the fact the Fed is still talking rate cuts despite the potential upward pressure on inflation from Trump’s trade and tax policies.
Indeed, the Fed delivered its widely expected 0.25% rate cut last week – and indicated it will only respond to Trump’s potential new set of policies when and if they feed through to their forecasts on economic growth and inflation. That won’t happen any time soon. As such, another rate cut in December still seems likely – but it’s becoming a more data-dependent proposition.
Global week ahead
An obvious focus this week will be any hints on the early priorities of the incoming Trump administration – a focus on tax cuts would be market-positive, though a focus on trade wars less so.