The S&P 500 and the Nasdaq 100 increased their capitalization by 2% in the first hour of Donald Trump’s electoral victory. The Dow Jones Industrial rose 3.1%. While the Stoxx Europe 600 fell 0.6%, Chinese stock markets fell in line with US gains – with 4% declines in the early stages of their tech indexes – and the yuan joined the readjustment that the dollar was realizing. the euro, the pound sterling, the yen or the Mexican peso, among others.
For their part, cryptocurrency portfolios, assets appreciated by the next tenant of the White House, which he promised to deregulate instead of following the regulatory guidelines requested by central banks, displayed unbridled joy. Bitcoin immediately rose 7.4% to $74,248 per unit, and ether rose 9.8% to $2,652.
At the same time, the profitability of 10-year Treasury bonds, which reflects the long-term confidence of investors in the world’s largest GDP, increased by 18 basis points, to reach 4.4%, contrasting with the drop of three points of pack The German, emblem of European stability, at 2.40%, a few hours before Chancellor Olaf Scholz dismissed his Finance Minister, the liberal Christian Lindner, due to irreconcilable disagreements. And the value of Tesla – the automated vehicle factory of Elon Musk, the Republican leader’s economic guru – increased by 15% after Trump’s praise of the SpaceX boss and old Twitter.
“He has character. He’s a special guy. A super genius […] and we must protect the geniuses because we lack their skills”, he declared as soon as he certified his victory at the polls to corroborate that the richest person on the planet will be responsible for using the scissors to further reducing the American welfare state with a particular passion for cuts in subsidies for Bidenomics, the economic policy of its predecessor, the platform that now gives its name to Twitter. platform users social.
So, are the markets right-wing? It seems to be in their DNA; although they later adapt to the electoral cycles of different political signs. This is inferred from the impression of Mohamed El-Erian, president of Queens’ College, Cambridge: “Trump has obtained electoral and legislative support [con el dominio sobre las dos cámaras] broad enough to apply urgency to the structural and productive change it intends to implement. Despite the fact that the dashboard insists on certifying that the US GDP continues to show resilience in the face of recession, full employment, controlled inflation and rising wages. That the barrel of crude oil remains stable while waiting for the White House to restore its support for the old fossil economy is another vestige that the entrance hall The oil company returns to Washington.
What is working well, is it not affected?
In a few hours, Biden’s successor confirmed the investment preference for conservative governments by obtaining a truce to justify, without alarm or urgency, his change of direction to stone “any aid” from the bidemonics. Even if the Fed lowers rates. Following the instructions of the Heritage Foundation, think tank ultraconservative who has introduced trade protectionism and tax cuts into Republican programs since Ronald Reagan, and his Project 2025 expresses “radioactive measures” for Trump. As if an industrial reconversion is underway to protect demand for supplies and raw materials or to manufacture chips made in the USA It would not require federal resources, like any previous productive revolution.
Climate denial and the doctrine according to which private capital, the only one authorized to create economic cycles and benefit from them, will once again settle comfortably in the White House.
“One of the reasons markets generate wealth and distribute profitability is because of me. » Trump’s words at the end of his first term a few days before launching the assault on the Capitol. Even if the first oscillation of the stock markets after a presidential election in the United States prevents us from seeing the stubborn reality. Natixis recalls that, since 1976, Wall Street’s profit under Democratic mandates was 14.3% compared to 10.8% under Grand Old Party (GOP) presidencies.
Failing to know the closing of 2024 to seal the evolution of the Biden legislature, which will hand over the keys to the Oval Office in January, the Carter-Clinton-Obama trident generated stock market increases of 14.9%, far from 4, 9% combined from the Reagan-Bush – father and son – and Trump administrations. In 2023, the S&P 500 increased by 21.9% and recorded several capitalization records this year.
A good (economic) time to preside over the United States?
Bidenomics and its subsidies served as fuel Keynesian propelling activity in an economic cycle characterized by constant geopolitical threats, value chain disruptions, trade and logistics collapses and a competitive race for the technological scepter full of monetary, economic, professional and financial tensions.
Biden implemented them, due to the demands of the Great Pandemic, in homes and businesses and, when the fiscal stimulus ended, he transferred them to industry and renewable energy. Despite this, GDP sealed a minimal technical recession, with a contraction of 2% and another of 0.6% in the first and second quarters of 2022, coinciding with the Russian invasion of Ukraine. But with four quarters above 5.2% and therefore its growth potential.
On average, Biden’s term boosted the economy by 2.8%, four-tenths more than Trump’s path and his big tax cuts, and the same pace as GDP recorded during the third quarter of this year, the last data recorded, just before. the elections.
The Democratic legacy “leaves good economic omens,” underlines Julia Coronado, founder of the research firm MacroPolicy Perspectives. Despite this, the Republican leader wants to abandon another dogma of faith of the GOP: more tax cuts and tariff battles to “redirect their effects on assets,” anticipates David Rosenberg, president of Rosenberg Research. According to him, the reformulation of MAGA (Make America Great Again), Trump’s political mantra, leaves a serious warning, because “it is still a prescription for steroids” which can generate a speculative bubble on American values ” with the consequent risk of an uncontrolled explosion.
In addition to creating “collateral damage in the United States and the rest of the world” with its increases in import customs duties, estimates Nicolaos Panigirtzoglou, strategist at JP Morgan Chase. “Trump intends to transform measures that should be exceptional into structural measures”, they harm the free movement of goods, services and capital and can bifurcate globalization.
Some of these omens have already appeared. On the day the Republican was declared the winner, the ten richest people on the planet – including Musk, Bezos and Larry Ellison, CEO of Oracle – gained 64 billion, their biggest daily stock market accumulation since 2012, the year of the launch of Bloomberg Wealth. Hint. The Tesla owner alone increased his assets by 26.5 billion.
Trilogy of risks in the United States and European and Chinese suspicions
But the concern, beyond this paradigm shift, revolves around three specific aspects. The first, his radical shift in energy policy with the defenestration of Biden’s climate legacy, which he described as a “scam”. Despite the “enormous progress” driven by green and industrial democratic action, underlines Professor Javiera Barandiarán, of the Center for Climate Justice at the University of California. The IRA and the Chips Acts – he says – increased sustainable investments by more than 40%, aimed at projects such as the Enel solar plant in Oklahoma – worth $1 billion -, that of LG Energy and Arizona (2,300 million) or the lithium refinery of the chemical company Albemarle in South Carolina for an additional 1.3 billion.
Second, the declared intentions of interference in the monetary sovereignty of the Fed which horrifies experts but which Trump intends to subordinate to the renewal of Jerome Powell’s mandate in 2025 to facilitate lastingly low rates which can stimulate activity and hide blackheads of his future management like the double increase of the deficit and the debt, even if they can provoke another inflationary spiral, the fictitious ghost that he raised to give the electoral finishing touch to the Democrats.
And, to finalize the trident, a desire for deregulation which will not favor monopolistic complaints against companies in the bigtechas explained Financial Timesas Kamala Harris wanted to promote, and this will further fuel the “destabilizing” fire that, according to the IMF, is gripping the markets with its ardent defense of cryptocurrencies.
In Europe, Trump’s victory coincided with the end of the German tricolor government, to the satisfaction of the ascendant neo-Nazi AfD party, and with the call for a motion of confidence in January providing for early elections, the European locomotive is is seized, the euro once again under the yoke of parity with the dollar and an emergency meeting of the Franco-German axis to weigh the return of the euro Trumpism and its effects, more pernicious than during his first mandate, on the EU. Europe is also threatened with increases in customs tariffs and must increase its military costs in a crucial phase to inject competitiveness with common financial resources and tools such as Eurobonds which take up the diagnoses of Mario Draghi and Enrico Letta .
“More Europe” and economic integration, investment and security are on an official agenda that would be modified if a far-right wave erupts, driven by version 2.0 of Trump. “The EU will be subjected to a whole exercise in economic survival,” says Aslak Berg, from think tank Center for European Reform (CER).
Like China, whose GDP would fall by two points per year with customs duties of 60%, calculates the Macquarie fund. Especially since Beijing is “better prepared” to fend off another tough trade battle and is finalizing a second stimulus program of an additional 1,000 billion yuan – almost $140 billion – that Goldman Sachs and HSBC are advancing and which will aim to “ recapitalize » banks and real estate companies. and restore the tranquility lost by their stock markets in 2024. Just during US election week.
