To The Moon

Wall Street is buzzing with "Trump trades" as discussions about President Biden's potential re-election bid heat up. Traders are adjusting portfolios, tweaking assets like the dollar, bonds, and more in anticipation of a possible return to the White House by Trump. Experts predict a Trump re-election could spur trades benefiting from loose fiscal policies and escalated trade protectionism. This includes a stronger dollar, higher US bond yields, and upticks in sectors like banking, healthcare, and energy. 1.Dollar Signal The dollar is the quickest to react in these "Trump trades," strengthening just hours after recent debates. Trump's proposed tax cuts and hefty tariffs on imports from China and other countries are key factors. Goldman Sachs' chief economist Jan Hatzius warns that these tariffs could hike inflation, prompting the Fed to raise rates five times. Morgan Stanley strategist Joyce Chang adds that Trump's victory might lead to high inflation and a robust dollar, potentially hurting currencies like the Mexican peso and Chinese yuan. 2.Yield Curve Trading In the bond market, US 10-year Treasury yields surged 20 basis points in the days following the debates, driven by a steepener trade where investors buy short-term and sell long-term bonds. A number of Wall Street strategists, including Morgan Stanley and Barclays, have advised clients to prepare for sticky inflation and higher long-term yields during Trump's second term. 3.Stock Market Rise On the stock front, sectors like finance, healthcare, and energy saw gains post-debate. Companies like $UnitedHealth(UNH)$ $Humana(HUM)$ $Discover(DFS)$ $Capital One(COF)$ $Occidental(OXY)$ could benefit from relaxed regulations, mergers, and Trump's pro-oil stance. 4.Financial ETF The Financial Select Sector SPDR Fund (XLF), reflecting bullish sentiment in banks due to deregulation and steepening yields, witnessed significant inflows recently. XLF saw net inflows of about $540 million last week, its biggest inflow in more than two months. Inflows of $611 million have continued so far this week. 5.Asian market In Asia, Trump's potential victory spells trouble for Chinese stocks due to strained US-China relations and potential tariff measures. Japanese stocks, closely linked to China, might also face pressure as a result.