market report
As of: November 6th, 2024 10:05 a.m
Trump’s looming election victory is causing significant price fluctuations on the markets. Bitcoin is hitting a record high, Wall Street is celebrating – and even the DAX is posting price gains.
While the last votes are still being counted, it is already clear to the stock market that Donald Trump will return to the White House. The market reactions are correspondingly clear, and the “Trump Trade” is experiencing a revival on the stock market. Yields are rising, as are the dollar and US stock index futures. Bitcoin is hitting a record high.
Even the European stock markets are going up – even though European companies are likely to be among the victims of a protectionist trade policy including aggressive punitive tariffs under Trump. The DAX rose by up to 1.5 percent to 19,545 points in early trading.
In the medium to long term, however, a return of Trump to the White House could clearly have negative consequences for German companies and thus also for the stock markets here.
“A second presidency of Donald Trump would affect the entire European economy, especially the German one. While Trump’s first term in office hit a German economy at its peak and the economic miracle 2.0 was still being celebrated, possible punitive tariffs, deregulation of the US financial sector and geopolitical ones are coming Tensions at the worst possible time,” emphasizes ING chief economist Carsten Brzeski.
After four years of stagnation and structural weaknesses, Germany is not only the “sick man of Europe” but is also more vulnerable than it was eight years ago.
In the short term, however, the DAX and Co will initially be infected by the positive reaction from Wall Street. The futures on the major US indices such as the Dow Jones Industrial Average and the technology-heavy Nasdaq 100 rose significantly overnight and are now up around two percent.
This time, Wall Street is reacting positively to the looming President Trump – that was different in 2016. However, investors quickly abandoned their initial fears that a protectionist agenda under Trump would harm share prices. Instead, they welcomed the prospect of tax cuts for companies and a focus on growth-enhancing measures such as infrastructure investments. The first “Trump trade” was most pronounced in the month after the election.
“For Wall Street, a switch from Democrats to Republicans is statistically the best of all stock market scenarios,” explains analyst Jochen Stanzl from broker CMC Markets. What is surprising, however, is that Wall Street also seems to appreciate the prospect of a Republican majority in both chambers of parliament.
In the past, the stock markets had always favored a Congress divided between Democrats and Republicans, as this represented increased stability and predictability.
Meanwhile, the reaction is particularly clear on the crypto markets, which welcome the self-proclaimed “Bitcoin President” with open arms. The oldest and most important cyber currency Bitcoin shot up in the morning and reached a new record high of over $75,000.
Trump had recently increasingly sought votes from the crypto community – after he had made very negative comments about Bitcoin during his presidency. The Republican announced at an industry conference that he would become the “Bitcoin President” that America needs. Under his leadership, the US would become the global cryptocurrency leader. If Trump actually becomes US President again, market experts are convinced that Bitcoin could reach the $100,000 mark in the medium to long term.
The US dollar is also benefiting massively from the current vote counting results, with the greenback rising noticeably. In return, the euro weakened significantly and fell by 1.8 percent to 1.0737 dollars. Currency investors appear to believe strongly that a Trump presidency will be dollar-positive given his likely high-inflationary policies.
However, the currency markets are initially ignoring a major risk for the dollar: the independence of the US Federal Reserve could be damaged under Trump; the Republican has repeatedly made hints in this direction in the past. “If the inflationary measures were to come but at the same time the Fed was put on the chain, such a policy mix would lead to a very significant weakness in the dollar,” emphasizes foreign exchange expert Ulrich Leuchtmann from Commerzbank.
Just like a rising dollar, a sharp rise in yields also characterized the first “Trump trade” after the 2016 election. Yields on ten-year US government bonds shot up by almost 100 basis points. Is history repeating itself here too?
In fact, yields on ten-year government bonds initially jumped by 15 basis points this morning. The biggest risk for bond markets now is that Trump’s protectionist economic policies, such as higher tariffs and less immigration, will slow growth and fuel inflation, while expanding tax cuts will increase the budget deficit. Not an easy scenario for the US Federal Reserve, which will decide on its further monetary policy tomorrow.
