“Trump trades” appeal fades as the U.S. Dollar loses post-election momentum

According to Bloomberg, investors in some asset classes were pulling back from their “Trump trades” as the dollar lost its post-election gains. They questioned whether Trump would go through with his ambitious tariff proposals. Treasury yields also returned to pre-election ranges after the 10-year and 2-year Treasury yields went up 4.49 and 7.7 basis points, respectively, after Trump’s win.

According to QCP Capital, the crypto market performed even better as Bitcoin hit a series of all-time highs to cap at the 77K range. Coingecko’s data shows that Bitcoin traded in a tight range since its surge, mostly above 70 K.

The BBC’s report also suggested that Bitcoin’s recent spike could be attributed to Trump’s stance on crypto and his pledge to make the U.S. the ‘world’s Bitcoin superpower.’

U.S. Bitcoin and shares hit all-time highs while ‘Trump trades’ lose traction 

The value of assets tied to President-elect Trump, together with those perceived as likely to benefit from his administration, surged immediately after his win.

Bitcoin and Wall Street shares hit record highs as U.S. shares posted the biggest gain in eight years, and Bitcoin skyrocketed past its previous ATH of $73.5K to touch 77K. The dollar also surged 1.65% against a host of other currencies, including the Japanese Yen, the Euro, and the pound. 

David Bahnsen, chief investment officer of the BAHNSEN GROUP, highlighted that investor sentiments were now pro-growth, pro-deregulation, and pro-markets. However, a senior U.S. economist at ABN AMRO RESEARCH, Rogier Quaedvlieg, analysis suggested that the full implementation of Trump’s tariffs and policies would eventually weigh heavily on the U.S. economy.

Alvin Tan, head of Asia FX strategy at RBC Capital, also added that there was widespread skepticism about Trump following through on his pledges and actually pursuing his policies and tariffs. 

Therefore, some assets associated with Trump, such as Bitcoin, were now moving sideways as doubt slowly started to creep in. The key question in every investor’s mind was how much of Trump’s threatened tariffs, including the 60% tariff on Chinese goods, would become reality.

“These election results will be really bad for fixed income and can unwind a lot of the bullishness in fixed income…With higher tariffs, the Fed will not be in a position to cut rates even if the economy is slowing down- and that is a toxic mix for fixed income.”

– Andrzej Skiba, head of Bluebay U.S. fixed income, RBC Global Asset Management

Skiba observed that Trump’s plans to increase tariffs with every trade partner could increase inflation and halt the Fed rate cuts. Jack McIntyre, global fixed income portfolio manager at Brandywine Global Investment Management, said this initial reaction was surprising.

Post-election Bitcoin rally stalls as investors become cautious 

QCP Capital said that the ‘unprecedented’ $1.38 billion Bitcoin spot ETF’s net inflows on November 7 had propelled BTC and was likely to keep pushing its price up.

Notably, Bitcoin had now navigated three election cycles since 2009, each followed by a rally to a new high, and prices never returning to pre-election levels, added QCP Capital. The crypto assets trading firm was confident that Bitcoin’s bullishness would continue into 2025.

QCP expected Bitcoin to carry ‘less risk premium’ compared to other equities, thus attracting more retail capital and possibly boosting BTC prices.

However, Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore, also observed that there was a sense that even the ‘most exuberant’ Trump trade investors were taking a step back to weigh their options. 

Coingecko’s data confirmed that BTC’s price is now (almost) moving sideways within the 70K to 77K range after surging 7% after Trump’s reelection.