Global Economy & Markets, Weekly Roundup 11/11/24
The S&P500 surpassed the 6000-threshold due to expectations for business-friendly policies (lower taxes, lighter regulation)
Former US President Donald Trump prevailed in the 2024 Presidential elections, securing 312 electors in the 538-seat Electoral College (a majority of at least 270 was required to win) and is set to re-assume office as of January 20th 2025. Importantly, the Republicans switched the balance in their favor in the Senate and, most likely, maintained the majority, albeit probably a slim one, in the House of Representatives (“Red-Sweep”).
The Republican majority in the Congress, combined with the President-elect’s clear political mandate and his solid position within the Republican Party, suggests that the prospect of Mr. Trump’s Presidential political agenda transforming into law, is strong.
Mr. Trump’s economy-related political priorities include, inter alia, lower taxes, especially for corporations, on top of an extension of tax cuts enacted in 2017 which are currently set to expire in the next years. Furthermore, an easing of regulatory frameworks for corporations has also been an important part of the campaign pledges.
A further stepping up of trade protectionism is likely, with higher import tariffs appearing to be in the forefront. Recall that the outgoing Biden/Harris administration has promoted protectionism mostly via trade restrictions, while largely maintaining the tariffs imposed during Mr. Trump’s first term. Finally, stricter border controls alongside mass deportations have been a pivotal part of Mr. Trump’s campaign pledges. If followed though, there could be meaningful implications for labor supply.
Expectations for business-friendly policies boosted US bourses, with the S&P500 at +4.7% wow, while reaching the 6000 mark for the first time on November 11th. US small-caps, usually more domestic-oriented, surged by +8.6% wow. Regarding S&P500 sectors, Banks overperformed (+7.3% wow) in view of expectations for less regulation.
Note also that Bitcoin has leaped by +28% since the US Elections (November 5th to November 11th), at a record high of $88770, as Mr. Trump has pledged a supportive stance towards the crypto ecosystem. Investors’ bullishness towards the US corporate sector was also reflected in a narrowing of USD corporate bond yield spreads, especially in the high yield spectrum (-20 bps wow to 263 bps, the lowest since June 2007).
US Treasury bond yields were little changed on a weekly basis, -5 bps wow for the 10-year to 4.31%, with a dovish press conference by Chair Powell offsetting the +14 bps increase that took place on November 6th. The Fed cut the federal funds rate by -25 bps to a range of 4.50% - 4.75%, as expected. The US Dollar gained ground across the board, more so against the euro (+1.9% to a 7-month high of $1.065), as the latter was also weighed, inter alia, by political uncertainty in Germany.
In the event, the government coalition consisting of the Social Democratic Party (SPD), the Alliance 90/The Greens and the Free Democratic Party (FDP), practically collapsed, after the Chancellor (SPD) dismissed the Finance Minister Ch.Lindner (also the head of the FDP). Without the FDP’s support, the coalition lacks the absolute majority in the legislature, with a vote of confidence according to media reports set to take place on December 16th, likely followed by snap elections on February 23rd. The ongoing political uncertainty acts as an impediment to economic agents’ decision making.
Former US President Donald Trump prevailed in the 2024 Presidential elections, securing 312 electors in the 538-seat Electoral College (a majority of at least 270 was required to win) and is set to re-assume office as of January 20th 2025. Importantly, the Republicans switched the balance in their favor in the Senate and, most likely, maintained the majority, albeit probably a slim one, in the House of Representatives (“Red-Sweep”).
The Republican majority in the Congress, combined with the President-elect’s clear political mandate and his solid position within the Republican Party, suggests that the prospect of Mr. Trump’s Presidential political agenda transforming into law, is strong.
Mr. Trump’s economy-related political priorities include, inter alia, lower taxes, especially for corporations, on top of an extension of tax cuts enacted in 2017 which are currently set to expire in the next years. Furthermore, an easing of regulatory frameworks for corporations has also been an important part of the campaign pledges.
A further stepping up of trade protectionism is likely, with higher import tariffs appearing to be in the forefront. Recall that the outgoing Biden/Harris administration has promoted protectionism mostly via trade restrictions, while largely maintaining the tariffs imposed during Mr. Trump’s first term. Finally, stricter border controls alongside mass deportations have been a pivotal part of Mr. Trump’s campaign pledges. If followed though, there could be meaningful implications for labor supply.
Expectations for business-friendly policies boosted US bourses, with the S&P500 at +4.7% wow, while reaching the 6000 mark for the first time on November 11th. US small-caps, usually more domestic-oriented, surged by +8.6% wow. Regarding S&P500 sectors, Banks overperformed (+7.3% wow) in view of expectations for less regulation.
Note also that Bitcoin has leaped by +28% since the US Elections (November 5th to November 11th), at a record high of $88770, as Mr. Trump has pledged a supportive stance towards the crypto ecosystem. Investors’ bullishness towards the US corporate sector was also reflected in a narrowing of USD corporate bond yield spreads, especially in the high yield spectrum (-20 bps wow to 263 bps, the lowest since June 2007).
US Treasury bond yields were little changed on a weekly basis, -5 bps wow for the 10-year to 4.31%, with a dovish press conference by Chair Powell offsetting the +14 bps increase that took place on November 6th. The Fed cut the federal funds rate by -25 bps to a range of 4.50% - 4.75%, as expected. The US Dollar gained ground across the board, more so against the euro (+1.9% to a 7-month high of $1.065), as the latter was also weighed, inter alia, by political uncertainty in Germany.
In the event, the government coalition consisting of the Social Democratic Party (SPD), the Alliance 90/The Greens and the Free Democratic Party (FDP), practically collapsed, after the Chancellor (SPD) dismissed the Finance Minister Ch.Lindner (also the head of the FDP). Without the FDP’s support, the coalition lacks the absolute majority in the legislature, with a vote of confidence according to media reports set to take place on December 16th, likely followed by snap elections on February 23rd. The ongoing political uncertainty acts as an impediment to economic agents’ decision making.