Recent Insights of Trump Trade

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 would then react to the increase in inflation and then increase the FFR. Therefore, the US Dollar Index is expected to increase, based on the Trump trade and so on policies. Trump’s website illustrate 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 to increase interest rate, but the MoF 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 industries might be accelerated, but Green Energy Industries might be less considered. Also, lower corporate tax, higher earnings per share equals higher stock market.

Anyway, with the Trump Trade, the inflation is expected to increase, so the Fed or MoF react by increasing FFR. Subsequently, US dollar index increase (as rate increase), Gold and Crude Oil decrease (as USD appreciate), and US Stock price increase (and US corporates benefit from tax cut).

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