Trump’s Victory in the U.S. Election Sparks Market Shift
Donald Trump’s victory in the U.S. presidential election has shifted market focus to his core political agenda—tariffs, manufacturing, real estate, cryptocurrencies, and more. These sectors have outperformed the broader market over the past two weeks, with cryptocurrencies standing out. On election day, Bitcoin hovered around $75,000; two weeks later, it surged past $90,000, setting new record highs. This rally reflects Trump’s campaign promises, including the dismissal of the current SEC chairman, seen as unfriendly to cryptocurrencies, and his pro-crypto stance. These moves have fundamentally altered the development landscape for the cryptocurrency sector. Meanwhile, Elon Musk’s newly established “Department of U.S. Efficiency” (DOGE), shares its name with the meme cryptocurrency Dogecoin, which doubled in value within a week—from $0.20 to $0.40 per coin.
A Cautionary Macro Backdrop for Equities
Beyond the booming sectors, the macro environment remains fraught with risks for equities. The U.S. economy remains robust, with unemployment falling and CPI hovering at 2.4%. This strength has kept the Federal Reserve from rushing to cut rates. Fed Chair Jerome Powell indicated a pivot toward neutral monetary policy. However, the pace and scale of liquidity improvements are slowing, and given the current economic landscape, liquidity injections may be less aggressive than initially anticipated. Yet, markets continue their exuberant climb, with “Trump Pump, Buffett Dump” emerging as the new market mantra.
Whether liquidity and geopolitical momentum can sustain the rally in U.S. equities remains uncertain. In our view, absent a black swan event, significant pullbacks in equity markets seem unlikely. However, the rising VIX index base underscores the need for caution. Market corrections may not require a reason, but declines often do.
Key Macro Data and Sectoral Shifts
This week is relatively light on major macroeconomic events, with initial jobless claims and U.S. PMI data taking center stage. Last week, initial claims fell to a recent low of 217,000, reflecting a robust labor market. This week’s consensus is 220,000, and we expect the data to remain at these low levels. Manufacturing and services PMIs are likely to continue the trend of weak manufacturing and strong services, though this dynamic may be shifting. With Trump’s presidency, manufacturing could gain momentum, while services maintain their current trajectory, presenting potential opportunities for early positioning. Consider indices like the Russell 2000 or manufacturing and tech-focused firms like Tesla (TSLA).
Outlook: Cautiously Bullish with a Crypto Focus
We maintain a cautiously bullish outlook. The rising U.S. Dollar Index and the 10-year Treasury yield breaching 4.5% serve as warnings of potential risks to equities. From a return perspective, we currently favor cryptocurrency trading over stocks. Despite Bitcoin’s recent surge past $90,000, we believe it has at least 10% upside potential, targeting $105,000 in the near term. Moreover, altcoins offer significant growth potential, though their performance hinges on liquidity spillovers. For now, the market remains in a rotation phase across sectors.
In equities, we lean toward manufacturing and technology-oriented companies like Tesla (TSLA) and TSMC (TSM), which stand to benefit from favorable sectoral trends.