OPINION BY LUKMAN OTUNUGA
America has chosen Republican Donald Trump as its 47th president following a tight race for the White House!
Assets tied to the “Trump trade” rallied during the Asian session after Trump took an early lead with his victory keeping bulls in the game. US futures are flashing green, Treasury yields have jumped while Bitcoin hit an all-time high.
Before Election Day, we thoroughly discussed a list of assets that could soar on a Trump win:
What does this mean for Nigeria?
Trump’s victory may pressure oil prices as he is seen pushing for a further increase in domestic oil and gas production, leading to increased supply in the long term.
In addition, his policies could see a boost in US growth – triggering inflationary pressures.
Should this prompt the Fed to keep interest rates higher for longer, a stronger dollar may drag oil prices lower as a result. This could be bad news for major oil producing countries who acquire most of their revenues from oil sales. For Nigeria, the combination of lower global oil prices and a stronger dollar could add to its woes as it navigates a rough period.
Here are assets that could be burned by Trump’s return to the White House:
The bigger picture…
Trump’s return to the White House will most likely set the market tone for the next few years with the USD, Bitcoin and other assets tied to the “Trump trade” the biggest winners.
Investors with some skin in the game have already experienced how markets reacted under Trump between 2017 – 2021.
Trump’s unpredictability, policy uncertainty and tariff wars with China left investors on edge. This and other major themes triggered sharp moves on the Vix index during his term. Market volatility jumped over 60% during Trump’s previous administration, from 2017 until 2020. Since then, volatility fell about 10% under President Biden.
What does this mean?
And Trump’s return to the White House is likely to trigger fresh levels of volatility across the globe.
By the way….
With the US election done and dusted, the next market-moving event could be Thursday’s Fed rate decision.
As discussed in our week ahead report, US interest rates are widely expected to be cut by 25 basis points in November. But the election outcome is likely to determine what action the Fed will take in December and beyond.
Traders are currently pricing in a 67% probability of another 25-basis point cut by December.
Given how Trump’s victory could lead to rising inflationary pressures down the road, this may prompt the Fed to keep interest rates higher for longer.
It will be wise to keep a close eye on the US dollar and gold which remain sensitive to US rate expectations.
