After an exciting election night in the USA, the world woke up to a new political order. All signs indicate that Donald Trump is returning to the White House, and the Republicans may gain the majority in both houses of Congress. Financial markets are dynamically responding to this change: American assets are increasing in value, futures contracts on Wall Street are rising, and the dollar is strengthening. The 7% increase in Bitcoin and a drop in gold prices indicate possible geopolitical changes and shifts in economic policy, potentially signaling a shift in trends in the coming months – says Tomasz Gessner, chief analyst at Tavex.
We are behind a long, election night in the United States, watched by the whole world. On Wednesday morning, everything indicates that Donald Trump won the election, and the Republicans also have a chance of gaining a majority in the Senate and Congress, which would significantly facilitate the work of the new president.
Beyond numerous comments, we also see the first reactions of the financial markets. Since Trump campaigned with the slogan “Make America Great Again”, investors are counting on maintaining tax preferences for American corporations and are mindful of protectionist promises in the form of tariff implementation.
This all is resulting in a clear win for American assets on Wednesday morning. Futures contracts for Wall Street indices have gained about 2%, the dollar index has gained 1.5%, while American bonds are losing out, with their yields continuing the rise seen in recent weeks due to fears of a reactivation of inflationary pressure (e.g., due to the trade war). Trump is also associated with a favorable attitude towards cryptocurrencies, hence the 7% increase in Bitcoin, which is once again reaching record levels.
Geopolitics should not be overlooked here. While Harris was a guarantee of continued support for conflicts in Ukraine and the Middle East, Trump is more inclined to attempt their resolution. This particularly pertains to Ukraine, especially after the recent rift between Zelensky and Trump, when the Ukrainian president, after repeated attempts to pressure the US, was defined by Trump as the “best salesman in history”. If, after reducing American support for Ukraine, the country is forced to work out an agreement, this would remove geopolitical risk from this part of the world, which could benefit the valuation of Polish assets.
The specter of a reduction in geopolitical tensions is also evident this morning in the behavior of gold, which is slightly correcting. First of all, it should be remembered that over the year, the precious metal has risen by 40%, which is the best result since 1979. After such a strong move, there is plenty of room for correction, and this may be triggered by the election results. Apart from a decrease in global risk aversion, a stronger dollar and higher yields on American treasury notes may also disturb gold in the short term – emphasizes Tomasz Gessner, chief analyst at Tavex. However, secondly, consequences of the trade war promised by Trump, generating inflation, should also be considered. As US debt approaches $36 trillion, relative to GDP reaches 123%, and the annual cost of its service already exceeds $1 trillion, the Fed will be handcuffed in effectively combating inflation again. All of this will ultimately affect the purchasing power of the American dollar, against which gold perfectly protects. In the longer horizon, investors may turn towards this precious metal at the expense of US treasury note holdings – the analyst concludes.
Source: https://managerplus.pl/donald-trump-wraca-do-bialego-domu-rynki-reaguja-dolar-rosnie-bitcoin-zyskuje-zloto-spada-72894
