Trump Inauguration Sparks Market Mayhem

As Donald Trump returns to the White House, markets gear up for a new era of volatility, which could imply a new set of opportunities and assets under scrutiny.

New President, New Highs

On Monday morning, hours before the inauguration of Donald Trump as the 47th President of the United States, Bitcoin spiked to an all-time high. Despite the stock markets being closed for the Martin Luther King holiday, Trump showed his commitment to cryptocurrencies on Friday by launching his own cryptocurrency or "meme coin," which reached a market valuation of $10.7 billion by Monday. Additionally, Bitcoin saw a 6% single-day gain as the week began, suggesting it has recovered from the broader decline in equities throughout December, which had erased most of the gains resulting from the "Trump trade" bounce following the elections.

Traders expect increased volatility under the new Trump Administration, given the President's tendency to make market-moving statements on social media. The Republican Party is expected to swiftly address various issues that could impact markets, including tariffs, immigration and market regulations. Currency traders were alert to Trump's tariff policies. Tariffs are inflationary and could strengthen the dollar, making it more challenging for American companies to export. However, reports have so far shown that the new administration will adopt a less aggressive stance on tariffs than initially feared, at least for now.

The dollar declined substantially on Monday as yields fell, but it reversed course last night after Trump hinted at imposing 25% tariffs on Mexico and Canada starting February 1. As widely expected, Trump also signed an executive order declaring energy production a national emergency, aiming to expedite permitting and roll back environmental protections.​

Continued Uncertainty

Global markets adopted a cautious approach during closed markets on Monday as traders weighed the potential impact of Trump’s tariffs against a pro-business stance. Gold and crude oil prices traded slightly lower as the inauguration celebrations got going, while treasury yields rose marginally, supporting the US dollar. The British pound held its ground, and the Japanese yen reached a one-month high. Still, the dollar's gains faded during the Asian trading session as traders speculated that tariffs on China were not imminent. US equity futures generally traded in positive territory, with the tech-heavy Nasdaq leading the more defensive Dow Jones.

President Trump signed a "slew" of executive orders and made clear that more are coming. Most orders targeted political priorities, such as diversity, equity, and inclusion initiatives, withdrawing from the Paris Climate Agreement, and restructuring bureaucracy. However, the more market-sensitive issues, notably tariffs, were largely left for the future. Markets will probably approach this cautiously until the promised 100 executive orders are completed in the coming days, as they may provide clarity on the new administration's impact. Meanwhile, the US is expected to reach its debt ceiling on Tuesday, potentially leading to a protracted debate in Congress, although it is unlikely to have an immediate impact on the government. The Treasury holds substantial cash reserves of over $677 billion.​

Triangle Breakout?

Gold may or may not have completed a triangle pattern at $2670 per ounce. Without a break above the $2760 swing, the triangle pattern may not have been completed, as prices could fall as low as the bottom of the symmetrical pattern near $2650. Holding support at $2715 could add to the upward trend towards $2800 and beyond, with a break lower initially eyeing $2680.

Source: SpreadEx / Gold

Key Takeaways

As Donald Trump assumes the presidency, markets brace for more volatility. Bitcoin soared to record highs, while Trump's proposed tariffs and fewer-then-expected executive orders on sparked concerns over their economic impact. Cautious trading across global markets may continue until more clarity is provided.​