November 11, 2024
Election week may be over, but traders and investors still have their work cut out. The election of President Trump changes the financial landscape and market participants will have to bear this in mind over the next few years.
First things first: the US Dollar. The Greenback reacted strongly to the election result, gaining against major competitors to push the DXY up to 105. The Dollar has performed well over the past six weeks, in large part because of a higher interest rate compared to other currencies. The Federal Reserve has been unwilling to slash rates too aggressively because the US labour market has proven robust enough and inflation has been dampened enough to allow for less aggressive action. With Donald Trump at the reigns, the consensus is that inflation may increase again, which means the Fed will be even less inclined to cut rates. Nevertheless, the central bank continues to reiterate that all future decisions will be data driven, i.e. wait-and-see mode for now.
US stocks were certainly happy with the election result. The Dow and S&P 500 both gained an impressive 4.6% on the week and the Nasdaq Composite fared even better with a 5.7% weekly close. All three indices ended the week on record highs. Tesla (TSLA) rose a massive 29% last week thanks to both the result and a strong earnings report.
Cryptocurrencies took the news best of all. Bitcoin surged 17% last week following the result, dragging the rest of the market along with it. Total crypto market cap increased by almost half a trillion Dollars over the course of the week, bringing it to within closing distance of the 2021 all-time high.
In the immediate term, there is not a lot going on this week. Armistice Day in parts of Europe and North America will make for barren trading conditions this Monday. Tomorrow has equally little to offer in terms of tradeable events. Wednesday alleviates the boredom a little with US CPI data, before Jerome Powell delivers a speech the following day. Traders are probably grateful for the reprieve.
Intel was first introduced to the index back in 1999 but has suffered considerably in recent times. Its stock price has fallen over 50% year-to-date, bringing Intel’s market cap down to a mere $100 billion. Contrast this with Nvidia, which has seen its stock price almost triple this year alone, pushing its market cap well over $3 trillion.
Intel was once considered a giant in the chip manufacturing sector but saw its dominance crumble in the face of Taiwan Semiconductor Manufacturing Company (TSMC), a company heavily intertwined with Nvidia. Intel is also widely considered to have missed the boat when it comes to Artificial Intelligence. Whatever the reason for the downfall, the fact remains that Intel now has the lowest stock price of the price-weighted Dow index.
There is nothing out of the ordinary about switching up the composition of the Dow, which has existed since 1896 and has always included 30 companies since that time. Some companies have even left the index only to rejoin it decades later, such as Coca-Cola, Chevron and IBM. Others were unceremoniously kicked out of the club after over a century of membership, such as General Electric. That said, the bulk of the changes have occurred in the last thirty years.
The development serves as a reminder that nothing lasts forever, particularly in the world of finance. Intel inside no longer, at least as far as the Dow is concerned.
An eventful week draws to a close. There was nothing ambiguous about the market reaction to Trump’s decisive victory in the US election. The financial landscape in general will be grateful for the clarity of the result this time round, but looking at specific markets paints an even clearer picture. The Dollar is up significantly, as are US stock markets, not to mention cryptocurrencies. Tesla (TSLA) also rose sharply following the result, as did a number of tech-related stocks. Safe-haven assets such as gold on the other hand saw heavy selling pressure.
So where are markets headed moving forward? One of President Trump’s characteristic traits is of course his unpredictability, nevertheless some predictions can be established with relative confidence. Trump is expected to enact more protectionist measures, imposing additional tariffs on Asia and Europe with the aim of prioritising US-based manufacturing. He is also widely expected to lower corporate income tax and introduce policies to ease tax burdens in general. Finally, the president-elect is expected to reduce regulation across the board but particularly in the technology and financial fields.
As we have already seen in the crypto markets, that latter point may have the most immediate effect. It is very possible that the SEC will experience a significant reshuffling in the months following inauguration and for the crypto industry this cannot come soon enough. Cryptocurrencies have suffered through a total lack of guidance in recent years, almost begging for clarity from regulators but receiving nothing but punitive measures in return.
Inflation is one of the bigger questions. Many analysts claim that a Trump presidency will ramp up inflationary pressures, which is something that the Federal Reserve will have to contend with. Central banks around the world have only just started lowing interest rates, the Fed and the Bank of England doing so again just yesterday in fact. That being said, the change of the guard is still over two months away and the deeper structural changes will obviously take time to manifest.
Update: 9am UTC
At the time of writing, Donald Trump has won 267 of the 270 electoral votes required to secure his second term in the White House. The former president has already claimed victory and although the race has yet to be officially called, it is looking increasingly likely that the US electorate has made its decision. Trump is also ahead in a few keys states that remain to be tallied.
The Dollar is now up an eye-watering 1.5% on the day. The DXY flew past 105 earlier today and is now hovering just above that critical level. European markets are beginning to wake up and they are reacting very positively to the expected result; the FTSE 100 shot out of the gate as soon as the opening bell chimed. Gold dipped somewhat over the last few hours but appears to be regaining ground.
Bitcoin, volatile as ever, is retracting a little from the $75k record high it established earlier in the day but crypto as a whole is up massively. The original meme coin, Doge, blasted all the way to 22c this morning before making a slight pull back. For those not in the know, Doge is now associated with Elon Musk’s fabled “Department Of Government Efficiency”: a clear nod to a Trump victory.
A few hours to go before US markets open. Plenty of drama still to come.
Update: 3am UTC
Good morning. It is still far too early to be calling for a winner in the presidential race as results begin to trickle in from around the United States. No real surprises so far, deeply red states voting red, deeply blue states voting blue. Battleground states still very much up for grabs with the possible exception of Georgia, which is indicating a narrow lead for Donald Trump.
Currency markets are reacting very interestingly. On election day, the Dollar Currency Index fell 0.4% and looked like it more room to drop, however this morning in the Asian session the momentum has completely flipped. As of the time of writing, the Dollar is up a whopping 1% versus the usual basket. Strength in the Greenback at this stage of the election generally fits into the “Trump trade” narrative.
In the precious metals markets, gold has been remarkably stable so far; content to remain around $2,740 for now. In Japan, the Nikkei 225 rose 2% this morning, although weakness in the Yen could be the main culprit behind the move. Hong Kong’s Hang Seng Index opened low and appears directionless for the time being.
In crypto meanwhile, Bitcoin has just hit a new all-time high, topping $75k on some exchanges. Clues are starting to emerge here and there but traders have a long day ahead. Stay tuned.
The time has come. Today, the people of the United States will elect their 47th president. Join us on our rolling election coverage as we digest incoming developments and market movements.
Traders will have already noticed the volatility ramping up across various markets. In all likelihood, this is only going to get worse over the course of the day and potentially throughout the rest of the week. If the last election is anything to go by, the actual winner will not be decided any time soon. The drama may last a while. With that in mind, here are some election-specific survival tips:
Although 77 million Americans have already cast their vote, the bulk of the electorate have yet to do so. Voting starts early on Tuesday and booths will remain open until around 9pm local time at the latest. Results will start coming in a few hours after that, which means it will be a long night for those paying attention in Europe and the Americas. Once again, the final result may take a while to be announced. The tighter the race, the longer it will take.
The US election is special in that it focuses on a small number of battleground states: Pennsylvania, Michigan, Wisconsin, Georgia, North Carolina, Arizona and Nevada. Claims of unfairness are irrelevant - these states matter more than others and any news from them will have a bigger market impact.
The markets most prone to volatility are those tied to the US economy. In currencies, any USD pair becomes riskier. Gold, given its status as a safe-haven asset, may also see significant movement as market participants readjust to a different future. US indices are another obvious target for volatile swings; traders should be particularly cautious about possibly large opening gaps when US exchanges kick off tomorrow. Oil markets, already in the midst of international uncertainty, could also see some added friction.
Finally, traders would do well to keep an eye on cryptocurrencies this week. While other markets may be more subtle in their reaction to various candidates, with crypto this is not so. The Trump team is widely accepted as being the more pro-crypto of the two candidates, and indeed more than the incumbent Biden administration.
The latest Non-Farm Payrolls report, published last Friday, was shockingly bad. Estimates of 113k new jobs were quickly forgotten as the actual figure of just 12k came to light. Despite the glaring shortfall, market participants were quick to dismiss the report, claiming that successive hurricanes were to blame for the poor jobs numbers. Hard to gauge the effect of the weather on such matters, but the more one delves into the details, the worse the picture becomes. For one thing, all of the twelve thousand new jobs created emerged from the public sector; the private sector in fact lost 28k jobs. We also saw downwards revisions of 112k for previous months, which presumably had nothing to do with the recent hurricanes. To say nothing of the ADP employment numbers published two days prior, which revealed an increase of 233k jobs in October.
Positive earnings reports late in the week were enough to rise US stock indices on Friday. Despite the poor NFP data, the Dow Jones, S&P 500 and Nasdaq Composite all closed higher on the day. The Dollar also outperformed, the DXY gaining 0.4% on Friday.
As far as this week is concerned however, all bets are off. The US presidential election kicks off tomorrow, but how long it could take to confirm a result is anyone’s guess. An unclear or contested election would lead to considerable volatility across the board. The Dollar is already down 0.6% this morning in the Asian session, so it looks like currency traders will have their work cut out for them. The Federal Reserve will convene on Thursday for the next interest rate decision, currently predicted to produce another 25 bps cut according to FedWatch. On the same day, the Bank of England is also expected to lower rates on the Pound by the same margin.
Quarterly earnings reports from Microsoft (MSFT) and META dropped late on Wednesday evening. Despite the raw numbers being positive overall – even beating estimates – the burden of funding various AI ventures is beginning to spook some market participants. Profitability concerns are beginning to weigh on the tech sector in general and such worries were reflected in many stock prices yesterday. MSFT opened low and fell lower still, losing 6% on the day; META and Nvidia (NVDA) also both closed the session lower, losing 4.1% and 4.7% respectively.
Poor performances carried over to the wider Nasdaq Composite index, which lost 2.8% yesterday. Although mostly confined to the tech sector, the S&P 500 and Dow Jones also underperformed, the former falling 1.9%, the latter 0.9%.
A mixed bag of US economic data confused currency markets over the last couple of sessions. Wednesday’s employment change came in much better than expected, but Q3 GDP growth missed estimates at 2.8% instead of 3%. Thursday’s Core PCE price index edged slightly above expectations for the yearly figure although the result was hardly catastrophic.
The Dollar has been off the boil a little this week, the DXY losing another 0.2% yesterday to close below 104. The British Pound also suffered on Thursday in response to the new budget unveiled by the UK government, Cable losing half a percent against the Greenback. The Yen on the other hand gained 0.9% on the Dollar following the Bank of Japan’s decision to maintain rates at 0.25%.
With the US election less than a week away, no asset is immune to market volatility. This Friday, traders face the added threat of Non-Farm Payrolls, which currently forecast an additional 113k jobs. Treacherous waters out there.
Эрсдлийн дохио : Худалдааны дериватив ба хөшүүрэг бүтээгдэхүүн нь өндөр түвшний эрсдэлтэй байдаг.
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