To The Moon

Unexpectedly, just as the data super week came to an end, the weekend ushered in even more exciting news. Trump, the "King of Knowing", was shot when he delivered a speech at a campaign rally in Pennsylvania, and was characterized as an "attempted assassination" incident.

This news has attracted the common concern of the world, and it will inevitably cause certain fluctuations in the market when the market opens next week. Therefore, investors should pay attention to the market situation after the market opens on Monday before making investment plans, so as to avoid losses caused by too much swing.

As for the medium and long-term impact of the financial market, this incident mainly affected the probability of Trump being re-elected as president of the United States, which in turn caused the financial market to price Trump's policy measures in advance after he took office.

If Biden's probability of winning the election after the first TV debate is not too far behind, then after the shooting incident, Trump's probability of winning the election will be greatly improved, and it will exceed the probability gap between the two major candidates in any previous presidential election, then "Trump" pricing will be the key logic of financial markets in the coming months.

1. The impact of Trump's policies on the US dollar

At present, the market generally believes that after Trump returns to power, in view of his "America first" logic, the core of his policy is still to encourage manufacturing and overseas capital to return to the United States, which may lead to the strength of the US dollar again, and it is estimated that it will become difficult for the US Dollar Index to fall sharply below 100.

Under a strong dollar, commodity pricing will be more ambiguous. Different from the depreciation of the U.S. dollar, commodities usually rise as a whole when it depreciates. However, under a strong U.S. dollar, most commodities will return to fluctuations near the cost price.

For investors, commodities near the cost price have a margin of safety investment. At other times, it is more like risk speculation when the market is emotional, forming a pattern in which more rises must be adjusted, and more falls will return.

Second, the sensational "Treasury Bond default" policy

Trump came back to power, and there was a small but scary argument in the market.

Even at present, the scale of U.S. Treasury Bond debt is staggering, and Trump has repeatedly criticized the high debt of the United States. In Trump's view, traditional political and economic rules are no longer applicable, and he may seek more radical solutions, such as threatening or actually causing a small default on U.S. debt, in an attempt to reshape international financial rules.

Although the probability is very low, once it happens, it will have a significant impact. Therefore, everyone should keep a close eye on the trend of U.S. bond prices. If the decline is large, it means that the market has reacted to this probability. I hope everyone will re-examine this change. Asset allocation will also need to undergo major adjustments.

All in all, this week will be a critical time to observe the changes of the "Trump trade", and even the probability of the Fed's interest rate cut expectation will change due to the event. Therefore, no matter how good-looking the commodity last week is, the trend next week may be reversed. Please treat the market with caution.

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