"The Trump trade is very much buy the S&P 500, buy the Dollar and buy Bitcoin"

Following President Trump's win in the US election, the market has already shown its hand with the US Dollar strengthening across the board. This was specifically the case against MXN, EUR and CNH. The reason for this is due to potential tariffs that will be introduced against these countries and the subsequent inflow of business into the US. We expect this trend to continue into January with the Dollar strengthening while the stock market and crypto market also continue moving up. The next question will be on fiscal spending and if this will affect inflation in the US, and how this will affect said markets. For now the Trump trade is very much buy the S&P 500, buy the Dollar and buy Bitcoin.

Trump campaigned on an America-first platform with a focus on reducing regulation. As a result, sectors like industrials, infrastructure, financial services and technology could benefit from his win. However, markets tend to adjust to new information almost instantly, so the opportunity to take advantage of the election result may have already passed.

The Trump trade is simply to sell volatility. It’s not the sexiest answer, and I could probably say ‘buy Walking Tomato coin (yes, there is a crypto that derives its value from a GIF of a walking tomato)’, but really the whole trade right now is seeing volatility collapse. The VIX had been above its 200 DMA for a very long time, and there was a big lift up in call buying of volatility. That now needs to dissipate, which leads risk higher — and it’s currently doing that.

Trump’s election victory could support further upward pressure on UK mortgage rates. With the Bank of England’s penultimate monetary policy decision of the year on Thursday, US financial markets are buoyant post-Republican victory. By contrast, today EURUSD has nosedived by 2% and the GBPUSD has depreciated to 1.29 – a symptom of comparative growth and productivity trajectories. If Cable remains depreciated and import tariffs are imposed, the consequent inflationary pressures could ultimately support higher UK Gilt yields. In that environment, we could see marginally higher mortgage rates and the Bank of England cutting more cautiously than previously anticipated. All eyes are on Thursday's decision.