“特朗普交易”热度仍在，但还能持续多久?

After Trump won the usa presidential election last week, the dollar and us stocks, $Bitcoin (BTC.CC)$ and other assets deemed as the "Trump trade" responded positively. Currently, the "Trump trade" still looms over the market, as Trump's economic agenda of tariffs, tax cuts, and deregulation will significantly alter the global investment landscape. As Trump attempts to disrupt all norms from free trade to the independence of the Federal Reserve, this era may become increasingly turbulent.

However, investors are concerned about how far the "Trump trade" can go. Stocks, csi enterprise bonds, and other assets have appeared expensive relative to historical levels. Trump's trade protectionism policies may lead to a resurgence of inflation and force the Federal Reserve to maintain high interest rates for a longer period. Additionally, the usa economy is facing an expanding fiscal deficit and a weakening labor market, which may put pressure on economic growth prospects.

The concept of the "Trump trade" became popular after Trump won the presidential election in 2016, leading to a surge in usa stocks and the dollar, similar to the post-election situation this month. There is also a parallel to eight years ago, where expectations of relaxed regulations boosted bank stocks, making them one of the fastest rising sectors, while small cap stocks surged due to optimistic sentiment towards tax cuts and investment-related policy commitments. More broadly, these moves indicate investors' confidence in the Trump administration's policies to stimulate economic growth and corporate profits.

However, the reaction of the fixed income market this time is different from eight years ago. After a significant rise in the yield of the ten-year usa treasury bond on the first trading day after the election, it fell over the next two trading days before rising again. This volatility reflects participants' doubts about the next direction of the "Trump trade." To make matters worse, the Federal Reserve is currently in an easing cycle.

Given Trump's vow to implement a game-changing regulatory agenda favorable to digital assets and to establish a strategic reserve of bitcoin in the usa, cryptos are a key sector of this "Trump trade." All of this has led short-term traders and institutional professionals to invest billions of dollars in digital currency, pushing bitcoin and other digital currencies to record highs.

It is hard to say how long the 'Trump trade' can last. A few months after the 2016 election, the momentum of the 'Trump trade' began to fade. During the 2020 election, a series of events in the 'Trump trade'—the strengthening of the dollar, rising us bond yields, and the stellar performance of bank stocks and small cap stocks—were largely influenced by the pandemic, either giving up gains or reversing.

Today, the economy and market in the usa are at a more mature stage than eight years ago. $S&P 500 Index (.SPX.US)$ The pe is 26 times, which is 35% higher than in 2016. This leaves very little room for a new round of valuation-driven rebounds and raises the threshold for policies like Trump's tax cuts to boost corporate profits. More importantly, tax cuts without corresponding spending cuts may lead to a rebound in inflation, which could force the Federal Reserve to reconsider its plan to continue cutting interest rates. The recent tug-of-war in us bonds yields reflects these concerns.

Editor/Rocky