From dollar to stocks, Trump trade erupts across markets

financialpost.com:

Donald Trump quickly put his stamp on financial markets as his victory in the United States presidential election propelled “Trump Trade” plays across assets.

U.S. stocks surged, with S&P futures climbing 2.3 per cent; the dollar posted its biggest gain against major currencies since 2020; U.S. Treasury bonds tumbled, sending benchmark yields up by almost 20 basis points; and bitcoin soared to a record.

The swings send a clear signal that investors believe a second Trump administration will look a lot like the first one: a stream of policies (tax cuts, deregulation, tariffs) that will simultaneously stoke economic growth, corporate profits and inflation.

For those on Wall Street who’ve been riding the Trump Trade, and especially those who held their nerve as it wobbled on the eve of polling, it was a moment of vindication.

“If you had the Trump trade on for the last six weeks, it’s been outstanding,” Ed Al-Hussainy, a rates strategist at Columbia Threadneedle Investment Holdings Ltd., said. “The question is, these winning runs don’t last forever and is this a good time to take profits?”

While the message from investors is broadly positive, there is also a stern warning in the market gyrations.

The surge in Treasury yields underscores concerns that Trump’s policies will swell an already bloated budget deficit and reignite an inflation spiral that the U.S. Federal Reserve was only just finally quelling in the wake of the pandemic.

The 10-year breakeven rate, a market gauge of where long-term inflation is heading, surged to its highest levels since April. In the parlance of Wall Street, this is the bond vigilantes exerting pressure on leaders in Washington to keep spending in check.

“Vigilantes are in full control. Panic is