【MACRO Alert】From US stocks to gold : The profound impact of Trump’s policies on asset markets

Wall Street investors generally believe that in the early stages of Trump's second term, asset classes such as gold and Bitcoin may repeat their performance after Trump first took office in 2017. However, changes in the market environment and uncertainty about the new government's policies have led investors to disagree on the future trends of various assets.

US stock market: optimism and uncertainty coexist

The S&P 500 has gained nearly 4% since Trump's election, and last week it had its best week since early November, up 2.9%. However, the gains have not eliminated uncertainty in the market. Investors are debating whether the bull run can continue amid expected tariffs, a weakening rate-cutting cycle and questions about the new administration's regulatory policies.

Macro studied the performance of the three major U.S. stock indexes in the first 100 days of Trump's first term: the S&P 500 rose 5.3%, the Dow Jones Industrial Average rose 6.1%, and the Nasdaq rose 9.2%. However, investors generally believe that the market may not rise sharply again this time. Macro's CEO pointed out that the S&P 500 has returned nearly 25% in the past two years, and it will be difficult to reproduce the scene in the previous term unless consumer strength and corporate profits grow. That is to say , it is reasonable to pause the rebound while investors wait to assess what the new government may bring. He emphasized that U.S. stocks have been basically flat this year and investors may take a wait-and-see attitude.

In terms of sector performance, in the first 100 days of Trump's administration in 2017, the information technology sector rose 11.5%, while the energy sector fell 8.2%. But so far this year, the energy sector has led the market with a 9.2% increase, while technology stocks (down 0.2%) are the second worst performing sector in the S&P 500. The supply and demand of energy products are much more balanced than commodity prices reflect, and energy stocks are very reasonably valued and their dividends are generally attractive.

The U.S. dollar and Treasury markets: short-term volatility and long-term outlook

Since Trump's reelection, the dollar has also appreciated, boosted by his more protectionist and pro-tariff policies. He believes that long-term bond yields will move higher. The yield curve may temporarily steepen as bondholders demand more premium for the risk they take. He expects the U.S. 10-year Treasury yield to reach above 5% in the short term, and then some large institutions holding U.S. Treasuries will rebalance their positions back to the 4.5% level. He added that the volatility of U.S. bond yields in the first 100 days of Trump's second term will be very intense.

But some financial experts believe that this rebound may soon lose momentum. Macro's chief investment officer said that Trump may want a weaker dollar, so he guessed that most of the dollar's gains have been realized. The decline in the growth rate of US gross domestic product (GDP) may limit the strong dollar in the short term, but he does not think the dollar will collapse at any time. But some more optimistic views believe that the dollar will continue to appreciate, but unless there is a large-scale tariff policy, the dollar will not rise by another 10%.

Gold market: inflation expectations and geopolitical influences

voices in the market that gold will rise in the next 100 days , just like in 2017. And citing geopolitical uncertainty as a catalyst, while continued inflation and growing economic uncertainty, accompanied by rising government debt, are pushing gold prices towards key resistance levels above $2,700 an ounce. Despite the strong gains in gold, some analysts pointed out that the precious metal still has work to do to break out of its two-month consolidation period. Analysts also mentioned that gold may face challenges in the week after the inauguration of US President-elect Trump.

The Macro chief investment officer added that gold was able to rebound in the face of a strong dollar and rising real interest rates because of strong demand from central banks. He does not think this will change with the new administration, but people may be more inclined to buy gold in the event of tariffs imposed by the new administration. Despite being optimistic about gold in the short term, he prefers to buy on dips and wait to see if $2,700 can serve as support. That said, despite the significant bullish sentiment in the precious metals market, it is also important to note that gold is trading at an important resistance point .

The policy expectations for Trump's second term have had a profound impact on various asset markets. Although investors have different views on the future trends of assets such as US stocks, crude oil, gold and Bitcoin, it is generally believed that the policies of the new government will bring uncertainty.