Dear Client,

Starting from November 3, 2024, the trading hours of some MT4/MT5 products will change due to the upcoming Daylight Saving Time change in the US.

Please refer to the table below outlining the affected instruments:

The above information is provided for reference only; please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Betting markets have shown rising odds for a Trump victory in the upcoming US election. Traders are considering the potential inflationary effects of policies like tariffs under a possible second term.

Market participants are closely assessing what his potential win could mean for the upcoming U.S. presidential election. At the heart of this analysis is the so-called “Trump Trade.”

What is a Trump Trade?

The “Trump Trade” describes how markets and investors react to the economic policies and political moves tied to a Donald Trump presidency. This concept became prominent after his 2016 election, as markets responded to his agenda of deregulation, tax cuts, and expanded infrastructure spending. It mainly captures the expectation of a pro-business environment and economic stimulus that could bolster U.S. growth.

How the “Trump Trade” Affected Monetary Policy

To understand what the markets expect, it’s helpful to look back at market reactions during Trump’s previous term.

With expectations of stronger economic growth, the Federal Reserve adjusted its policies:

• Interest Rate Increases: As the economy gained momentum and inflation pressures rose, the Fed raised interest rates to keep growth steady. This was a change from the low-interest rates seen after the 2008 financial crisis.
• Balance Sheet Reduction: The Fed also began looking at reducing its large balance sheet, which had grown due to years of economic support. This shift signaled a move toward tighter monetary policies.

US Election 2024: Will All Roads Lead to Inflation?

Regardless of who wins the upcoming election, two billionaire investing legends remain focused on the US bond market due to the unsustainable trajectory of large US deficits.

“I have moved in that direction for sure,” Jones told CNBC when asked if he was adjusting his strategy for a possible Trump win over Vice President Kamala Harris.

“It just means more in inflation trades,” Jones added, joining other top investors in voicing concerns about the U.S. government’s fiscal outlook, regardless of the election outcome, given both candidates’ commitments to tax cuts and spending.

The Growing U.S. Debt Crisis

On the alarming US deficit and debt path: Jones didn’t hold back here—it’s worth watching as he breaks down the US debt problem in simple terms. He compares it to someone earning $100,000 a year but borrowing $700,000 and planning to add $40,000 more in debt annually. So, why would anyone still lend to the US government?

U.S. debt situation has spiraled out of control. Just 25 years ago, the national debt was a little under 60% of GDP. Today, that rate has doubled to 120%.

Source: OMB; St. Louis Fed; US Global Investors

Paul Tudor Jones warns the U.S. faces a fast-approaching debt crisis unless it tackles government spending. He notes that political promises of increased spending or tax cuts only deepen the issue, saying the U.S. will be “broke really quick” without serious fiscal action.

Stanley Druckenmiller, billionaire investor and former chairman of Duquesne Capital and former chief portfolio manager for George Soros’ Quantum fund, shared his views on the Fed, criticising its overly easy policies during the pandemic, when he believed rate hikes should have started sooner.

He also expressed concern that the Fed may be making a new mistake by cutting rates too aggressively, which could trigger another inflation spike if the economy stays strong and potentially compromise the Fed’s independence.

In case you missed, read our article on the 2024 September Fed cut here.

What can you do to protect your portfolio from election uncertainty

It’s worth noting that Druckenmiller is less interested in discussing the equity markets and is more focused on the risks to the bond market, which could impact stocks negatively. He specifically indicates that he is taking a strong position against US long-term treasury bonds, hoping to profit from a sharp further rise in US yields.

With Jones taking a similar stance, he said, “I’m long gold, I’m long bitcoin…Commodities are ridiculously underowned.”

Important: The interaction between bond yields and stock markets is crucial for understanding currency movements. If bond yields rise, it may lead to a stronger U.S. dollar (creating challenges for equities) as investors seek higher returns, thereby increasing demand for dollars to purchase U.S. bond.

3 strategies to navigate these market shifts

The “Trump Trade” meant reevaluating and adjusting their portfolios to adapt to the changing economic environment:

Fixed Income Strategy

Investors needed to be careful with long-term bonds because rising yields could decrease their value. Instead, they shifted their focus to shorter-duration bonds, which are less affected by interest rate changes. This approach helps reduce the risk of losing money if interest rates rise further.

Currency Considerations

For portfolios that include foreign investments, implementing hedging strategies has become increasingly important. This is to protect against potential losses due to a strong U.S. dollar, which can make foreign assets less valuable when converted back to dollars.

Geopolitical Hedging

It became wise to diversify investments into assets that are not heavily influenced by U.S. political events. Including safe-haven assets, such as gold or Swiss Franc, provides a buffer against market volatility caused by political uncertainty. These assets tend to hold their value better in turbulent times.

You might be interested: How to Manage Market Volatility in the US Elections

Why trade CFDs with VT Markets?

When considering wise words of these investing legends, one key observation is that they are extremely quick to change their mind if something dramatically new happens.

In fast-moving markets where prices can shift direction rapidly, you can trade CFDs across a wide range of assets, from forex to precious metals, capitalising on breaking news and political changes.

It takes less than 5 minutes to open your CFD trading account here.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

The Trump-Harris showdown begins: Voters in the US will go to the polls on 5 November to elect their next president. Will America get its first ever woman president or a second Donald Trump term? The election volatility brings a wave of both opportunities and challenges. Market participants are closely monitoring how it might impact both short-term and long-term trends.

Key Points to Consider in the US Election Impact

The 2024 US election is a tightly contested one, with two candidates, Kamala Harris and Donald Trump, each having unique approaches to economic policy.

Source: NY Times (As of 3 November 2024)

The result of this election will undoubtedly have implications for traders. Here, we explore how both the short-term volatility and the longer-term policies may affect market dynamics.

Short-Term Uncertainty and Market Volatility

Leading up to the election, market volatility is likely to spike due to the uncertainty surrounding the outcome. A tightly contested election can cause hesitation in the markets, particularly if the results are delayed or there are recounts in swing states. This uncertainty tends to lead to heightened short-term volatility, which is both an opportunity and a risk for different types of traders.

For day traders, this environment of short-term swings could be beneficial for seizing quick opportunities. On the other hand, longer-term traders may find themselves in a riskier position, with markets reacting suddenly to polling news or to disputes over election outcomes. The extended uncertainty could weigh on financial sentiment until January 2025, when the new president officially assumes office.

Continuity vs. Change: How Policy Affects Stability

If Kamala Harris were to win the election, market participants may anticipate a sense of stability as her administration would be viewed as a continuation of the Biden presidency. Historically, incumbent administrations have provided a more predictable environment, leading to smoother market transitions. Traders might expect less turmoil in reaction to the election results due to the familiarity with ongoing policies and existing economic plans.

On the contrary, a return of Donald Trump to the presidency could foster an environment of uncertainty. A new administration typically takes time to get up to speed, and traders may need to wait for new policies to be communicated and implemented before gauging their full impact. This scenario is more likely to trigger short-term volatility as the markets react to unknowns.

Longer-Term Implications Based on Policies

Looking beyond immediate market reactions, the long-term effects of the US election are tied closely to each candidate’s economic policies.

Kamala Harris: Harris’s potential continuation of Biden’s administration is likely to bring regulatory policies that affect financial markets. Her focus on social spending may increase national debt, putting downward pressure on the dollar, while potentially triggering inflation. Rising inflation could prompt the Federal Reserve to raise interest rates, which could then strengthen the dollar in the medium term.

Donald Trump: The 2016 Trump administration had a strong pro-business stance, focusing on deregulation and tax cuts, which initially strengthened the dollar. However, his position on fiscal stimulus could increase national debt, thereby weighing on the currency. Additionally, Trump’s unpredictable approach to foreign policy could lead to geopolitical instability, with potential consequences for the US dollar.

Source: Reuters

Both candidates have policies that could have a contrasting effect on the dollar. Fiscal stimulus and regulatory measures could simultaneously impact the value of the dollar, pushing it either higher or lower depending on how effectively policies are implemented and received by the market.

The Importance of Adaptability for Traders

Given the current environment, traders need to stay adaptable. Monitoring polling data, understanding the incoming administration’s economic plans, and watching the market’s response to breaking news are essential strategies. The Federal Reserve’s response to inflation—influenced by policies on spending, regulation, and commodity prices like oil—will be an important focus for traders, especially those with positions in US dollar pairs.

Short-term opportunities might emerge as market volatility spikes in response to evolving headlines, but understanding the long-term direction will require a careful assessment of policy impacts, especially around fiscal discipline and regulatory actions. We recommend paying attention to any shifts in the dollar’s trajectory due to changes in fiscal and monetary policy, as these will be key indicators in the months following the election.

For more insights, read this article on how you can manage market volatility in the US elections.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.