The red-hot Washington debate over whether President Joe Biden will scrap his run for re-election is spilling into Wall Street, where traders are shifting money to and from the dollar, Treasuries and other assets that would be impacted by Donald Trump’s return to office.
The consensus among traders and strategists is a re-election of Trump, a 78-year-old Republican, would spur trades that benefit from an inflationary mix of looser fiscal policy and greater protectionism: A strong dollar, higher US bond yields and gains in bank, health and energy stocks. Potential losers in the face of a rising dollar and Trump’s expected support for tariffs include the Mexican peso and Chinese yuan.
Signs of traders bracing for near-term volatility in the Treasury market emerged Wednesday, through a buyer of a so-called strangle structure, which benefits from a move higher or lower in futures through the strike prices. Along with potential risk over the holiday weekend around Biden’s candidacy, the expiry also incorporates Friday’s US jobs data and testimony next week from Fed Chair Jerome Powell.
Financials ETFs The exchange-traded fund market has shown one clear investing strategy of late: Long banks on bets that Trump will spur deregulation and a steeper Treasury curve thanks to his potentially inflationary agenda. Trump has floated slapping 60% tariffs on imports from China and 10% duties on those from the rest of the world as he campaigns for a second term.