FT News Briefing The highs and lows of the ‘Trump trade’
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Nov 8, 2024 Jennifer Hughes, FT's U.S. markets editor, and Atrakta Muni, FT's climate correspondent, dive into the impact of Donald Trump's election on the markets. They discuss the exuberant rally in U.S. stocks overshadowed by bond market caution and potential inflation fears. The conversation shifts to political ripple effects in Germany following government collapse and upcoming snap elections. Muni highlights how Trump's victory could hinder climate actions, setting a challenging stage for the UN COP29 summit, particularly for developing nations seeking climate finance.
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Split Market Reaction to Trump's Win
- US stock markets have rallied since Trump's victory, while bond markets reacted nervously.
- This 'Trump trade' suggests investors anticipate lower taxes boosting stocks, but tariffs increasing inflation, impacting bonds.
Stocks Up, Bonds Down: The Trump Trade Explained
- Stocks are expected to benefit from Trump's proposed tax cuts, which are seen as positive for corporate America.
- However, bonds are sensitive to potential inflation from his tariffs, which restricts the Federal Reserve's actions.
Muted Market Reaction to Fed Rate Cut
- The Federal Reserve's interest rate cut was widely anticipated, thus minimizing market reaction.
- The Fed is cautious in its statements, avoiding commentary on the potential impact of a Trump presidency.