The Trump trade is back in the spotlight. What is the Trump trade and why should traders pay attention?
First, the market had time to digest the assassination of Trump, which calmed down the whole thing a little. Now the market is thinking that in addition to Trump winning the election and defeating Biden, he may also win the House of Representatives and the Senate, which means he will control the entire Congress, which means he can do whatever he wants, and this is the origin of the Trump deal.
I encountered a few weeks ago that if Trump expands his lead in the polls, the market will focus more on Trump risk, which is exactly what is happening now. Some of Trump's policies will lead to high inflation, such as increasing tariffs on goods by 10%, and stripping the independence of the Federal Reserve, which is not good for the United States. So if he controls Congress, the market will be more confident that he can implement these policies, and even introduce more radical policies. Trump trading focuses on these aspects. Imposing tariffs will cause inflation, which is bad for US bonds; stripping the independence of the Federal Reserve is also bad for US bonds, and may even cause high interest rates in the short term until Trump takes down the Federal Reserve, but who will want to buy US bonds at that time?
So today as the European session started, we saw a massive sell-off of Treasuries, yields went up four or five basis points, which would be the biggest Trump trade. The dollar was slightly higher this morning, I'm not sure if this will continue as part of the Trump trade, but the biggest factor in the Trump trade is definitely the sell-off in Treasuries that we are seeing right now. The potential impact for gold and silver traders is that Treasury yields go up, which is slightly bearish for gold and silver.
As usual, show the signal of the internal model.
