Markets are all finally in positive territory after Trump won the US presidential election last week. The NASDAQ and the S&P 500, which got hit after the surprise win, are finally recovering ground. Bond yields soared, as investors pulled their funds from these assets, while the US Dollar also advanced against all major currencies. Gold prices dropped and an ounce is now trading at around $1,220 USD. Trump’s declared policy direction is the main driver behind these shifts.
Trump will spend more on Infrastructure
One of the reasons why this shift is taking place is because President elect Trump is showing interest in expanding expenditure on infrastructure. This coupled with his pledge to get rid of some financial regulation as well as some environmental regulation, boosted the markets. Goldman Sachs is one of the major winners, and other traditional blue chips are also trading higher.
On the flip side, the so called FANGs – Facebook, Amazon, Netflix and Google – are all down. This should change once Trump articulates his high tech development policy. President elect Trump has Peter Thiel, a brilliant Silicon Valley entrepreneur working with his transition team. Thiel will help Trump shape his tech development policy, especially in the increasingly attractive realm of FinTech.
Bonds and Gold Selloff Worrying?
In the meantime, analysts are focusing on the reason why there was a selloff in bonds and gold. Some say it is because President Trump will run huge deficits, which will make bonds riskier. But that doesn’t square with the selloff in gold. Investors would have flocked to gold if they sensed that deficits will skyrocket. Gold would also be an attractive asset if the rate of inflation rises, and many are speculating it will. But the double selloff – bonds and gold – seems like a move to take advantage of soaring stock prices.
In the meantime it seems that capital will flow into the US, boosting the markets further. The US Dollar has sustained its gains against other major currencies, and those buyers will be looking for yields. The fact that the Fed is poised to raise interests has also helped US Dollar bulls. This brings the Trump era markets full circle in terms of their readjustment. It seems that there are a lot of gains to be made under in the Trump era, although there will certainly be some risks that many analysts have not accounted for yet.