Trump effect on USD, markets

The Nexus between Politics and Economics

President Trump made the following crucial statement on February 9th: "We're going to be announcing something I would say over the next 2 or 3 weeks that will be phenomenal in terms of tax." To be sure, the nucleus of the President’s economic plan is the simplification of the tax code. To get this accomplished means everything for the stock market. Without a reduction in tax rates the air compressor that has been blowing up equity prices to near record and unsustainable valuations will explode.

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How to Trade President Trump

Key Trump PromiseEffect on StocksEffect on USDEffect on Gold
Increased fiscal spending/stimulus - Particularly on infrastructure and defenseBullish - Increased economic growth and industrial production help boost equity marketsBullish - Increased spending leads to higher inflation and interest rates, pushing up USDBearish - Higher growth, interest rates, US Dollar and stocks should weigh on Gold
Lower corporate taxes - Down to 15% from 35%Bullish - Lower taxes increase after-tax cash flow and earnings, and bring income back to USBullish - Economic growth through lower taxes and fiscal stimulus boost interest rates / USDBearish - Higher growth, interest rates, US Dollar and stocks should weigh on Gold
Financial deregulation - Repeal heavy regulations on Wall Street and corporate AmericaBullish - Fewer regulatory hurdles increase financial and banking activity, fostering business growthBullish - Increased financial activity leading to economic expansion should lift interest rates and USDBearish - Higher growth, interest rates, US Dollar and stocks should weigh on Gold
Increased job creation - Retain and create jobs in the USBullish - More jobs lead to higher spending, demand and increased business growthBullish - Better employment rate leads to hawkish Fed and higher interest rates / USDBearish - Higher growth, interest rates, US Dollar and stocks should weigh on Gold
Protectionist trade policies - Tariffs and restrictions on Mexican, Chinese imports and othersBearish - Restrictions on trade can create trade wars and backlash on US companies doing business abroadBullish against targeted EM currencies, Bearish overall if trade wars resultBullish if trade wars result, which could boost gold as a safe-haven currency alternative

Watch: Trump Trades from our Panel

Hot Takes on Trump Presidency

The Best Reasons to Buy Gold in the Age of Trump

Notwithstanding the strong demand for gold and silver globally, buying activity in the U.S. retail market for physical bullion has fallen noticeably in the wake of Donald Trump’s election victory. And retail selling in the U.S. has increased. The bullion markets have entered a new phase. The two terms of President Obama included the aftermath of the 2008 financial crisis, zero interest rate policy from the Federal Reserve, and...

Trade War or Negotiation

Donald Trump, the US President has taken the country out of the Trans-Pacific Partnership. He wants to redo the terms of the NAFTA agreement and use the lure of the U.S. market to redress what he says are unfair trade arrangements. Are international trade agreements unfair? Do they penalize certain groups for the greater whole as economists argue? Can Trump's administration impose new terms of trade...

Trumpin' and Thumpin' back to the 1930s

The Trump administration's “America First” mantra is predicated on a withdrawal from the Trans-Pacific Partnership (TPP) and a renegotiated North American Free Trade Agreement (NAFTA). If Canada and Mexico cannot see Trump eye to eye in the coming talks, the President will simply give notice of the US intent to withdraw from NAFTA. The new White House intends to crack down...

USD/MXN: The Trump Trade

The American dollar vs. Mexican peso clocked, as of writing, another trading session in red due to Banxicos 'fix' via a $20 billion auction in FX hedges. The peso appreciation accelerated as prices broke the 100-DMA. Hence, the central bank decided to intervene the exotic avoiding additional rate hikes, but such solution has little to no impact in the country's economy.

USD/MXN Best Spreads

Donald Trump, a billionaire real estate mogul billed as the ultimate outsider, aims to shake up the US political establishment, which could potentially cause extensive market volatility along the way. Going forward, Trump should have a substantial impact on various key financial markets such as US Dollar, Euro, Yen, Pound and other important currencies as well as stocks, commodities and bond markets.

Trump was the second major-party presidential nominee in American history whose experience comes principally from running a business (Wendell Willkie was the first). By getting elected, Trump became the first United States President without prior government or military experience, and the first without prior political experience since Dwight D. Eisenhower.

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