Donald Trump is definitely very strong. After overcoming seven bankruptcies, escaping two attacks and being the loser in all the polls in both 2016 and 2024, Donald Trump managed to be elected President of the United States twice. Enough to make all the pollsters and so-called specialists on the United States turn pale, who we have seen and heard almost everywhere for weeks, thundering that Donald Trump had no chance of becoming the tenant of the White House again…
After the similar disappointment of 2016 or even Brexit, this reminds us how the different establishments“elites” of all kinds and certain media are disconnected from economic, political and societal reality. Indeed, populations are less and less fooled and more and more difficult to manipulate. When growth was strong, unemployment was low and taxes were moderate, mistakes, lies and denials of reality could at times be forgotten. Today, such slip-ups and other deceptions no longer go unpunished.
Dollar: “Many banks expect a plunge, but it has not said its last word”
The election of Donald Trump boosts Wall Street, but the CAC 40 suffers
But Trump’s success does not stop with this victory, it goes even further. So, while his election raised fears of the worst and should therefore logically have led to a collapse of the financial markets, this was not the case. On the contrary, the American stock market has even multiplied its historic highs since November 6. Quite differently, after a fanfare start on the morning of November 6, the CAC 40 and the European stock markets then tumbled, the time to understand that Donald Trump’s victory was above all good news for the economy and American businesses.
Indeed, already rather very efficient, the latter should benefit from even greater support from the new Trump administration. The famous “America first” and “Business first”. These two leitmotifs are not the prerogative of Donald Trump. Indeed, whoever is in the White House, growth and full employment are unwavering objectives of American economic policy. Thus, while the explosion of public debt and the “printing of money” only made it possible to gain a little time in France and in the Euro Zone, they strongly revived Uncle Sam’s economy, which has thus once again become one of the main engines of global growth.
Moreover, the day after his election, far from adding fuel to the fire, President Trump preferred to emphasize the need to bring his fellow citizens together, to generate more growth and jobs, to lower taxes and to enable the United States to return to the path of sustainable economic dynamism. Such a speech obviously did not fail to boost the dollar, particularly against the euro, the latter also being penalized by the political crisis which has just begun in Germany, with the dismissal of the Minister of Finance. A storm that comes particularly badly, as Donald Trump has promised to massively increase customs duties on many European and particularly French products.
«The French economy did not need Trump’s victory to collapse»
On this subject, we should also not exaggerate the economic consequences of these potential measures. First of all, because these are campaign promises, which will certainly be watered down in reality. In addition, let’s not forget that the United States only represents 7% of French exports, or less than 2% of French GDP. So there is nothing to panic about. In fact, France did not need Trump’s victory to collapse for several years already. In other words, if Trump is the ideal scapegoat, it is high time for French leaders to stop the demagoguery and take responsibility for their multiple and massive strategic errors over the past three decades.
The election of Donald Trump causes bitcoin to soar and the dollar, which is appreciating dizzyingly against the euro
In the meantime, from a financial point of view, Donald Trump’s victory in the presidential elections on November 5 has already had three major consequences. First, the dizzying surge in the price of bitcoin which even exceeded $93,000 on November 13. Second, the surge in the S&P 500, which was certainly less impressive than that of bitcoin, but which nevertheless allowed the latter to break several historical records, surpassing the symbolic bar of 6,000 points on November 11. Third, the election of Trump favored a clear rebound in the dollar and the collapse of the euro. So while it was around $1.12 at the end of September and (too) many forecasters saw it still rising sustainably, the euro logically fell back. First at $1.08 at the end of October, before rising to 1.09 on November 5, finally collapsing to $1.05 on November 14, the lowest since October 2023. Our target of $1.05 for the end of the year and which made some people smile not long ago was therefore reached more than a month in advance.
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Political crises in Germany and France contribute to the fall of the euro against the dollar
Of course, the speed of this fall is largely explained by Donald Trump’s speech in favor of an America “Great Again”, but also by the political crisis which is taking hold in Germany. Indeed, by dismissing his Finance Minister Christian Lindner, who wanted to avoid any excessive slippage in German public accounts, Chancellor Olaf Scholz shattered the fragile coalition which had ruled Germany until now. New legislative elections should therefore take place at the beginning of 2025, with a strong risk of a “French-style” situation, that is to say an absence of a clear majority. A political crisis which comes at a particularly bad time, to the extent that the German economy has been mired in recession for more than a year and is starting to suffer from a sharp increase in layoff plans and unemployment.
CAC 40, growth… “beware of the shock wave of dissolution and political crisis in France”
In this context, it must be recognized that the Euro Zone is falling into its most serious existential crisis since the Greek storm of 2010-2015. And for good reason: its two first members in terms of economic power (in this case Germany and France) are experiencing a major political crisis, without a legislative majority to lead them and continue to blame each other for the current setbacks. As for the other members of the EMU, and in particular Italy, the Netherlands and Austria, their leaders do not hide their Euroscepticism which is also starting to spread like an oil stain. In addition, past and future growth gaps remain largely to the advantage of the United States. From 1995 to 2024, American GDP at constant prices increased by 106.6%, compared to + 53.9% for its Euro Zone counterpart. Obviously, there is no photo.
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The appetite for the euro is melting like snow in the sun, especially since the Europe-United States rate gap is to the advantage of the dollar
Furthermore, and unfortunately for us, leading indicators of activity show that these gaps in wealth creation will remain high, with growth stabilized between 2.5% and 3% in the United States, compared to around 0.5%. both in France and throughout the Euro Zone. Enough to maintain a differential in monetary and bond interest rates also to the advantage of the dollar. In this increasingly perilous context for the EMU, it is clear that the appetite for the “single currency” is melting like snow in the sun. To make matters worse, if the depreciation of the euro could slightly support the exports of EMU members, it will also lead to an increase in the price of imported products, boosting inflation again, which will prohibit the ECB from significantly relax its monetary policy, thereby fueling the economic lethargy of the Euro Zone. In this context, the euro could quickly fall below parity with the dollar, aggravating the crisis of confidence which increasingly threatens the members of the euro zone and the latter as a whole. Fasten your seat belts!
Marc Touati, economist, president of the ACDEFI firm, author of 8 economic best sellers, including RESET II – Welcome to the world after, released in September 2022.
© Marc Touati
You can also find his video chronicles on his YouTube channel, which has more than 196,000 subscribers, including the latest: “Trump, Social Crisis, Germany: France and Europe in Danger?”
