Was it moderated? Or was he radicalized? The President-elect is uncertainty. Wall Street, after Thanksgiving, resumed the Trump rally. What is stronger? The Bessent signal or the tariff signal? It’s not the stock market, it’s the bonds that are scared.
What will Donald Trump’s second presidency be like? Will experience moderate or exacerbate it? From the polls he receives a disruptive mandate. From the Biden Administration, a legacy that should be kept intact: a solid economy and inflation back within the 2% fold. Above all, inherits a central bank willing to continue lowering rates all next year, if there is no news on the front.
Of course, Trump cannot be asked to go unnoticed. Less when he occupies the center of the scene. It is known, he cannot handle his genius. He remained silent on economic policy until he appointed his Treasury secretary, a financier, Scott Bessent. He thus gave a clear signal of moderation. Which are two: the cabinet grid is completed and the whereabouts of Robert Lighthizera crusader for protection mechanisms in his first term and in the campaign.
But Trump gives a hand of lime and another of sand. First he sedated the beasts and then he himself announced a shower of rising tariffs. The three main trading partners of the United States made up the nominated shortlist: China, Mexico and Canada. China is the strategic enemy that must be stopped. Mexico and Canada, no, they are allies. And Trump already renegotiated Nafta in his first term and signed a new trade agreement with both, the USMCA. The message is clear: no one is exempt from Washington demanding a unilateral change in the rules of the game, even if the rules were agreed with Trump himself. So, Did it moderate? Or was he radicalized? Trump is uncertainty. As Martin Sandbu says, unpredictability is his method, not a mistake. When he takes office, on January 20, we will know on which foot he wants to begin his administration.
Everything looks good for the stock market. And the bonuses?
Wall Street, after Thanksgiving, resumed the Trump rally. He thanked President Biden for everything good that was this year, but, as you know, the Stock Market is looking ahead. The past, stepped on. What matters is what comes. What is stronger? The Bessent signal or the tariff signal? For the stock market it is not a problem. Buy everything since September (when Kamala was still running). And this week he climbed another step. The S&P 500 index advanced 1.06%. The Nasdaq, 1.13%. The Dow Jones surpassed them, 1.39%, after crossing the 45,000 point mark for the first time, although it closed below. The highlight was the Russell 2000, the basket of small companies, which rose 1.48%, and is bidding to beat its historical record in 2021. It has already been said: Trump’s protectionism suits him well.
It’s not the stock market, it’s the bonds that are scared. They were uncomfortable with Kamala, but much more so with Trump’s exuberant plans. The US debt is sustainable, but its trajectory is an invitation to catastrophe. And the Republican platform promises an accumulation of liabilities, in the next ten years, twice as large, in terms of GDP, as that of its opponents. An exacerbated Trump will be difficult to digest. And, in that sense, that Scott Bessent is the strong man of the Treasury, a fiscal hawk, as well as an experienced currency trader, is excellent news. Remember that the exchange rate will be your turf, not the Fed’s. Designating it is a courtesy addressed to the “bond watchers.” And what about the preaching of tariffs? They didn’t care. The ten-year rate fell almost a quarter of a point, to its lowest level in the last five weeks: 4.18%. Thus it twisted its incessant increase. And the dollar made the mirror movement. It stopped strengthening in a clear sign of decompression.
Does the Trump style no longer keep you awake?
Trump is vociferous, but could it be that his well-known style (frightening and then negotiating) no longer keeps him awake? Nobody made a drama out of his rhetoric. History repeats itself, after all. Warning the BRICs that they will be hit with a 100% tariff if they dare to boycott the dollar’s leadership is a farce. China alone already had 60%. And there are still two months until he takes office. The president of Mexico, Claudia Sheinbaumspoke with Trump. He believes that differences will be settled without any fee being imposed. Justin Trudeauthe Canadian premier, shared dinner on Friday at Mar a Lago. Christine Lagardewho runs the ECB, has already advised Europe to put together a shopping list of American products to calm Washington. There are several countries that harbor this idea. China, in 2020, with an ad hoc trade agreement (which it did not fully comply with) launched the modality.
In the campaign, Bessent pointed out that tariffs should be thought of as a tool to extract concessions. But if everyone is willing to give in, Trump is going to toughen his conditions. You’ll demand more to make sure you don’t leave money (or perks) that you could take off the table. Thus, we are condemned to dealing. If this is just a transaction, subject to the calculation of costs and benefits, the limit will not be set by kindness but by horror. Trump’s fear, not anyone else’s. “Trump is the most pro-Stock Market president in history”says Jeremy Siegel. You don’t want to ruin the bull market then. There will be no tariff to pay it. And if everything goes well for the stock market, it will be the bonds – with a jump in long rates – or a crunch in the currency market that will say enough is enough. So that the blood does not reach the river, the financiers of the economic team – Bessent and Lutnick in Commerce – will have to do the math correctly beforehand and convince Trump to avoid the miscalculation.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
