Just like Ray Charles, Donald Trump is a master of the responsorial genre. As he makes his calls, the markets respond. And opportunities are emerging.
Legend has it that the song “What’d I Say” was born unexpectedly when Ray Charles, running out of songs near the end of a concert in Brownsville in 1958, called out to his audience. musicians and choristers: “I’m going to improvise, follow me.” We know the rest: a timeless classic, in the “call-and-response” style, which forever marked the history of R&B.
Another master of the responsorial genre – but in a very different register – has just been re-elected president of the United States, also promising a wind of change. As nations struggle to tune their violins and financial markets have already begun to swing, it seemed fitting to choose “What’d I Say” to open this column.
Because yes, since November 5, all the spotlight seems to be focused on Donald Trump. And the markets already seem to have a firm idea of the direction the world will take. At least, they are quick to follow the tempo each time the future president unveils a new centerpiece of his government. And there are perhaps future opportunities to exploit in this excess of zeal.
But let’s return for a moment to the market response.
Let’s start with those who quickly followed the president in his solo. Since the beginning of November, the S&P 500, the flagship index of the American stock market, has been progressing, driven by a wind of optimism. A tune already heard: remember that in 2016, the markets had already welcomed the arrival of Donald Trump at the White House, although this time, some nuances appear. If deregulation and tax cuts remain pillars of the new government’s policy, new priorities also seem to be on the agenda, pushing certain sectors, such as energy or banks, upwards.
Investors already seem to have turned their backs on most European and Asian indices, which are preparing to close the month in the red.
Another market that is singing at the top of its lungs is that of digital assets. The appointment, within the government, of several pro-crypto figures such as Elon Musk, Scott Bessent or Paul Atkins suggests a more favorable environment for the adoption of cryptocurrencies. Bitcoin took the opportunity to take center stage, flirting with the symbolic mark of 100,000 USD.
Now let’s move on to the markets that are struggling to follow suit. If the presidency of Donald Trump promises to be under the best auspices – supported by a “dream team” of entrepreneurs and a majority in the Senate – it has not yet convinced the bond market, which has launched into clever calculations to assess whether the new government’s measures will generate more or less inflation.
However, obtaining support from the bond market is crucial for a government, especially with a public debt of 35 trillion dollars and staggering borrowing costs. Recent examples bear this out: in 2022, Liz Truss saw her economic measures rejected by the British markets, and this month, France recorded a borrowing rate higher than that of Greece. When the bond market doesn’t believe in a political agenda, it lets it be known, and these false notes can be very costly.
Outside the American borders, the singers are also missing. Investors already seem to have turned their backs on most European and Asian indices, which are preparing to close the month in the red. The prospect of new customs tariffs and more tense international relations is not encouraging. As for the commodity markets, they no longer know exactly where to stand. Demand remains sluggish, while supply attempts to adjust to tariffs and future U.S. energy policy.
If, for the moment, the reaction of the financial markets to the announcements of the new American president has been immediate and, to a certain extent, binary, the score still largely remains to be written. And this for several reasons:
First of all, the only predictable thing about Trump is his unpredictability, and the markets have not yet factored this into their expectations. Second, even the most promising government on paper must prove itself, and there is often a gap between theory and practice. Finally, the reaction of global trading partners has been completely neglected. Will Europe, Asia, Canada, etc. remain passive?
It’s not like they haven’t already been bitten by tariffs once, and the import-export game is much more subtle than you might think.
Ultimately, the response of the singers is just as important as the calls of the lead singer. And in the adjustments and disagreements will lie the greatest investment opportunities. So let’s sharpen our ears and get ready to join the dance!
