Recently, the controversy surrounding former US President Donald Trump has dominated the headlines of major media, and people's expectations for Donald Trump's victory have also increased significantly. "Trump trading" has also warmed up, and the most prominent impacts are:

• The 30-year Treasury yield exceeded the 2-year yield for the first time
• The three major US stock index futures rose collectively
• The price of Bitcoin exceeded $60,000

When the "Trump trading" becomes hot, it not only means that Trump himself has a super high economic influence, but also means that the market is betting that Trump's fiscal and trade policies will stimulate economic growth.

What is the "Trump trading"? What are the impacts on the market?

The "Trump trading" refers to a series of expected responses by the market to the fiscal, trade and regulatory policies that may be implemented during Donald Trump's administration. These policies include tax cuts, relaxation of financial supervision, etc., which usually have a certain impact on the stock market. In essence, the "Trump trading" is a trading model driven by market expectations. After the third televised debate of the US presidential election on October 19, 2016, Trump began to lead in the polls. As the market has good expectations for Trump's upcoming loose fiscal policy and tightened trade policy, market transactions show characteristics such as high interest rates, a strong dollar, and strong US stocks. So what is the motivation for the rekindling of the "Trump deal"? US President Biden's poor performance in the election debate last month has prompted the public to increase expectations of Trump's victory, which immediately stimulated the rise of the US dollar, reflecting the quick response of investors. They bought short-term US bonds and sold long bonds, making the so-called "steep trade". In the recent assassination incident, Trump showed toughness and encouraged people after the attack, strengthening his image of pursuing unity and sharing the same hatred, and further promoting the continuation of the "Trump deal". Strengthen.

This week, the "Trump deal" continued to emerge. The yield on the 30-year U.S. Treasury bond rose nearly 10 basis points to 4.47%, exceeding the 2-year Treasury bond yield for the first time since January this year. In terms of the stock market, the three major U.S. stock indexes closed higher on Monday. Most large technology stocks rose, with Tesla, Apple and Netflix up more than 1%, and Microsoft and Google up slightly. Among them, Apple's stock price hit a new record closing high, with a total market value of $3.59 trillion. Due to Trump's friendly stance on digital cryptocurrencies, Bitcoin soared by more than 10% in a week and rose by more than 5% in a day, reaching around $63,000 on Monday morning. Other digital cryptocurrencies also followed Bitcoin's pace and showed an upward trend.

What is the "rate cut deal"? What impact does it have on the market?

"Rate cut deal" "Easy" refers to a series of expected reactions of the market to the Fed's rate cut. In fact, the market's expectation of the Fed's rate cut has lasted for more than two months, and this Monday finally ushered in a major turning point: traders priced in the Fed's September rate cut for the first time 100%.

According to CME's Fed Watch tool, traders currently expect the Fed to reduce the target range of the federal funds rate to 5.0%-5.25% (a 25 basis point rate cut) after the September interest rate meeting with a probability of 90.9%, and a rate cut to 4.75%-5% (a cumulative rate cut of 50 basis points in the July and September meetings) with an 8.9% probability; there is even a very slight possibility of 0.1%, with a cumulative rate cut of 75 basis points in the July and September meetings...

This comprehensive increase in expectations for rate cuts has undoubtedly given the market strong confidence again. The "rate cut trade" is more prominent: the spot gold price hit a record high after two months; the prices of US stocks and US bonds also rose across the board; the S&P 500 index reached its 38th record high this year; the Dow Jones Industrial Average rose by more than 740 points in a single day; the yields of US bonds of various maturities generally fell.

Source: Yahoo

How will the "Trump trade" and the "rate cut trade" affect the market?

• The "rate cut trade" and the "Trump trade" both weakened, and the market will enter a defensive state.
• The "rate cut trade" weakened, and the "Trump trade" strengthened, and moderate risk aversion may push up the US dollar.
• The "rate cut trade" is getting stronger, while the "Trump trade" is getting weaker. The market is struggling with the balance, but it is generally good for long-term US bonds, European stocks and AH stocks. The RMB and oil prices will also be boosted.
• The "rate cut trade" and the "Trump trade" are both getting stronger. There are two situations: if it is a weak resonance, it is beneficial to assets such as US large-cap technology stocks, Japanese stocks, and steel; if it is a strong resonance, it is beneficial to assets such as Bitcoin and gold, and the US bond yield curve will become steeper.

Obviously, according to the analysis of this article, the current scenario does not belong to the first three: on the one hand, the June CPI inflation data fell beyond expectations, and Powell's dovish remarks boosted the Fed's expectations of the first rate cut this year in September. The "rate cut trade" is becoming more and more powerful. On the other hand, after the first round of presidential debates and shootings, Trump's poll support rate advantage has expanded, and the "Trump trade" has made a comeback.

Investors can match their investment portfolios and prevent risks based on the relationship between the two.

Follow us

Find us on Twitter, Instagram, YouTube, and TikTok for frequent updates on all things investing.

Have a financial topic you would like to discuss? Head over to the uSMART Community to share your thoughts and insights about the market! Click the picture below to download and explore uSMART app！

Important Notice and Disclaimer:

This document is prepared by uSMART. This document is not intended for or directed at persons under local laws or regulations that prohibit the distribution or publication of this document. This document is provided to the recipient only, and the information, materials, or analytical tools contained herein are provided to the recipient for informational and reference purposes only. This document should not be construed in any jurisdiction as constituting an offer, solicitation, recommendation, inducement, endorsement, opinion, or guarantee to purchase, sell, or trade any securities, financial products, or instruments or to engage in any investment or any transaction of any kind, nor is there any intention to solicit or invite the purchase or sale of any securities.

Investment involves risks. Before making investment decisions, the recipient should carefully read relevant offering documents to obtain further information, including risk factors. Past performance data does not imply similar future performance. Investments in the asset categories mentioned in this document may not be suitable for all recipients. This document does not consider the individual objectives, financial situation, or needs of any specific person who may access this document. Before engaging in any transactions, the recipient should take reasonable actions based on personal objectives and circumstances to ensure a clear understanding of the transaction and independently evaluate the suitability of the transaction, including assessing the potential risks and returns of the transaction, and if necessary, seek independent professional advice. The information and opinions contained in this document reflect the judgment of uSMART as of its publication date, and no further notice will be given in the event of changes. Neither we or our respective directors, officers or employees will be responsible for any losses or damages which any person may suffer or incur as a result of relying upon anything stated or omitted from this article.