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Markets got hooked on Trump

2020-10-09

2020-10-09

Is there life after Trump? Review as of 09.10.2020Dmitri Demidenko

Forex is following US stock indexes and reacts only to the US president’s freaks. Meanwhile, the Republican’s mental health seems to be worsening on the eve of elections.

Donald Trump doesn’t keep his promises, but the market will feel

gloomy without him

What do a Halloween pumpkin and Donald Trump have in common? They are both orange and empty inside, and they will be thrown away in November. The 45th US president used to be proud of growing stock indexes, saying that the S&P 500’s rally reflects the US economy’s power. Now all is different. The better the stock market feels, the fewer victory chances the Republican has. The bulls appear to stop loving him:

- I like you so much.

- No problem, you’ll be fine! First, everyone likes me very much. Then, not everyone. Then not so much. Then they dislike me. Then they dislike me very much.

The stock indexes used to fear that Joe Biden’s victory would lead to a tax rise, but now they are hoping for the Democrats’ large fiscal stimulus.  What will happen in 6 months doesn’t really matter as people will have money soon and start spending it. The USA will find someone better for sure because someone worse doesn’t simply exist. However, some would disagree.

- Donald, what are your good qualities?

- First, there are people worse than me.

There’s only one thing that Trump can do now: increase uncertainty, which results in the USD’s short-term consolidation. First, he’s diagnosed with COVID-19, then he recovers, then he stops the talks with the Democrats, then he resumes them. Speaker of the US House of Representatives Nancy Pelosi wonders if the president is sane. Or is it just the steroids? In fact, four years are enough for getting used to the White House tenant’s weird behaviour. The thing is, all mental health issues get worse in autumn…especially ahead of elections.

- Doctor, I’m afraid everyone hates me! By the way, is it OK to be calling you at night?

On the other hand, Trump may stir up envy:  the markets react only to his freaks, ignoring the Fed’s calls for a larger relief package and the ECB’s verbal interventions. The stock indexes are growing amid Trump’s lower popularity, and falling on greater uncertainty that he provokes from time to time. [EURUSD][1] is dancing to the [S&P 500][2]’s tune, and investors appear not to be caring about which currency will win or lose after the Democrats’ victory.    They were buying the Russian rouble and the Mexican peso amid Trump’s growing ratings in 2016, and now they are doing the opposite.

The US got to know Trump better and wants him to get lost now. He did not handle the Chinese issue, cut the negative balance of US foreign trade, raise GDP to permanent 3% or build a wall at the Mexican border. Political hassles, confrontation with the Congress, threats of impeachment and, finally, pandemic caused much trouble to Trump. Troubles are like tissues: you take one, and you get ten of them.

However, I must admit that the financial markets will be bored without the 45th US president. Who else will proclaim Jerome Powell an enemy of the US and accuse China of currency manipulations? Who will call Xi Jinping “an incredible guy”, and then trample him in the mud because of dishonest competition? So, should the Halloween pumpkin be kept for another four years?

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