Donald Trump’s victory in the just ended 2024 US presidential election triggered a jump in the US dollar, which climbed more than 1% versus key currencies, reaching its highest level in four months.
Analysts ascribed the increase to anticipated expansionary fiscal policies, such as tax cuts and infrastructure expenditure, which might boost economic growth while raising interest rates.
In contrast, oil prices are projected to fall, as Trump’s pro-drilling position may lead to higher domestic production amidst rising stocks and a stronger dollar.
However, global financial markets performed mixed as investors processed Trump’s defeat of Democratic competitor Kamala Harris.
Stock futures and Treasury yields both rose sharply in response to the emerging results, which some saw as a relief after days or even weeks of political and judicial bickering over contested votes.
So far, small-cap stocks tracked by the Russell 2000 have been the biggest equity index winners, rising about 6% ahead of Wednesday’s bell.
The S&P500 and tech-led Nasdaq futures were both up about 2%, while the VIX ‘fear index’ of equities volatility fell to its lowest level in more than a month, returning to historical lows.
Fearful of additional fiscal stimulus from Trump’s projected tax cuts on top of an already 6%-of-GDP budget deficit, the Treasury was hammered — with the benchmark 10-year yield reaching its highest since July, just shy of 4.5 percent.
According to Reuters, trading activity as of November 6, 2024 showed that the NYSE composite increased 1.54% to close at 19,763.79 points, while the NASDAQ composite index rose 2.51% to 18,902.43.
Meanwhile, the FSTE 100 index down 0.07 percent to conclude at 8,166.68 points, the Hang Seng Index fell 2.23 percent to 20,538.38, and the Shanghai SE composite index fell 0.09 percent to 3,383.81.
Lukman Otunuga, a senior market analyst at FXTM, believes it may not be good news for import and oil-dependent countries like Nigeria.
Following a close campaign for the White House, voters in the United States of America elected Republican Donald Trump as its 47th president, with Trump winning 277 electoral votes and taking control of the Senate. If he takes control of the House, it will be a “red sweep” situation.
According to Otunuga, Trump’s election may put pressure on oil prices because he is viewed pushing for more domestic oil and gas production, resulting in higher supply in the long run. Furthermore, his plans could improve US GDP, resulting in inflationary pressures.
“If the Fed decides to maintain interest rates higher for an extended period of time, a stronger currency may cause oil prices to fall. This might be terrible news for big oil-producing countries, which rely heavily on oil sales to generate cash.
“For Nigeria, the combination of lower global oil prices and a stronger dollar could add to its woes as it navigates a rough period.” He mentioned that assets that could be burned by Trump’s return to the White House include gold, which had declined as much as 1.5% due to a stronger dollar and increased Treasury yields.
Noting that the potential of slower Fed rate cuts could restrict upside gains, he pointed out that major US trading partners’ currencies, including the Euro, Chinese Yuan, and, in particular, the Mexican peso, have all dropped versus the dollar.
European stock indices had flashed red due to concerns about the impact of Trump’s proposed tariffs on Europe, while Chinese stock indices fell over increased concerns about US-China trade tensions.
Trump’s return to the White House is expected to define the market tone for the next few years, with the USD, Bitcoin, and other assets associated with the “Trump trade” benefiting the most. Investors with some stake in the game have already seen how markets reacted under Trump from 2017 to 2021.
Read Also: The Man Behind ‘Kampe’: The First Organic Herbal Drink
Trump’s unpredictability, policy uncertainty, and tariff conflicts with China have put investors on edge. During his tenure, the Vix index experienced significant movements due to these and other big issues. Market volatility increased by more than 60% under Trump’s prior presidency, from 2017 to 2020. Since then, volatility has fallen by around 10% under President Biden.
Otunuga stated that Trump’s return to the White House is likely to cause new levels of instability around the world. “Trump’s proposed tariff increases in Europe and China could lead to a global trade war.”
“If this raises costs for American consumers, a return to inflation may result in higher interest rates, supporting the dollar. Gold prices, as well as developing market currencies, may suffer when the dollar rises. On the international front, Trump has already promised to “stop wars” and quickly finish the conflict in Ukraine. Any significant shifts in US foreign policy that exacerbate tensions could cause risk aversion.”
