Finance
Haven Rush, ‘Trump Trades’ on Investors’ Minds After Recording
(Bloomberg) — Traders will initially rush to safe assets and reevaluate trades most closely tied to former President Donald Trump’s candidacy after he was shot at a rally, market watchers said.
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“No doubt there will be protectionist or refuge sentiment in Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all record levels. We will see the yen being bought and the dollar, and also flowing into government bonds.”
However, early market commentary suggests the shooting will boost Trump’s chances of winning the election, shifting attention to the securities most exposed to his policies and ultimately being negative for Treasuries.
Assets linked to the so-called Trump trade range from the dollar to government bonds to the stocks of private prisons, credit card companies and health insurers. Investors believe that Republican policies on tariffs, immigration and budget deficits will lead to a stronger dollar, higher bond yields and a more favorable environment for these stock sectors.
Traders will also be closely watching market measures of expected volatility on Monday, such as those on China’s rate-sensitive yuan, which has begun to price in US sentiment.
Trump said he was shot in the right ear after gunfire broke out during his political rally in Butler, Pennsylvania. His campaign said in a statement that he was doing “fine” after the incident, in which he was rushed off stage. One participant in the meeting was shot and died, and the shooter was killed by US Secret Service.
Strategists had already expected a volatile run-up to the November election, not least because Democrats are still concerned about President Joe Biden’s candidacy after his debate performance last month. Investors also grappled with the possibility that the election could turn into a protracted dispute or political violence.
But there is little precedent for events like Pennsylvania. When President Ronald Reagan was shot 40 years ago, the stock market fell before closing prematurely. The next day, March 31, 1981, the S&P 500 rose more than 1% and 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances, said Marko Papic, California-based chief strategist at BCA Research Inc.
“I think at some point the bond market needs to wake up to President Trump’s better chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his opportunities increase, so too will the likelihood of a bond market riot.”
Kyle Rodda, senior financial market analyst at Capital.com, said he saw clients pouring into Bitcoin and gold after the shooting. The cryptocurrency surged after the news broke.
“This news marks a turning point in American political norms and the need for greater political violence,” he said. “For the markets, this means trade in ports, but more towards non-traditional ports.”
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