Trump Trade is tied with Trump’s policy, and the potential of Trump’s victory.
Trump’s policy is likely to result in higher inflation (as he advocates high tariffs, low tax, looser fiscal). The Fed is expected to react to the increase in inflation by raising EFFR. Therefore, the US Dollar Index is expected to increase, based on the Trump trade and so on policies. Trump’s website illustrates polices such as Tax Cuts, Trade Protect to remain manufacturing power in the US. This year, there are people predicting that the Fed might not react by increasing interest rate, but the MoTreasury might react by increase the fiscal deficits.
Based on Trump’s previous policy in 2018, he loosened bank regulation and capital requirements. Leave the Paris Agreement and cut green energy that reduces the manufacturing efficiency. Related industries might be affected. For instance, Banking and Financial industries and Crude Oil related commodities might be accelerated, but Green Energy Industries might be less considered. Also, lower corporate tax, higher earnings per share equals higher stock market. Cryptos, through usually experiences the similar moves as Gold, might increase, because of the support from Elon Mask.
In sum, With the Trump Trade, the inflation is expected to increase, so the Fed or MoTreasury react by increasing FFR. Subsequently,
– US dollar index is expected to increase (as rate increase),
– Gold and Crude Oil are expected to decrease (as USD appreciate, rate increase, and debt increase), and
– US Stock price increase (and US corporates benefit from tax cut), and
– Cryptos increase (because of the support of Elon Mask, however there is downside power on it),
– Debt price is expected to decrease, yield increase (as FFR increase target rate).
End.