Trump scenarios in the markets

With DeSantis' withdrawal in the November 2024 US presidential election, Trump and Haley will compete for the Republican Party's nomination. Wall Street believes that Trump's possible return will increase the dollar and US bond yields. As of yesterday, the Republican governor of Florida, Ron DeSantis, has decided to withdraw from the November 2024 presidential race in the US. This leaves only two names left to compete for the Republican Party's nomination: Former US President Donald Trump and former US Ambassador to the United Nations and former South Carolina Governor Nikki Haley. DeSantis, who announced his withdrawal from candidacy two days before the New Hampshire primary, said he would support whoever the Republican Party nominee is, but that he believes Trump would be a better choice than Haley and incumbent Democratic President Joe Biden. A new poll by CNN and the University of New Hampshire showed that DeSantis has only 6 percent of the Republican vote in the state, while Trump has 50 percent of the vote and Haley has 39 percent of the vote. Wall Street billionaires Stanley Druckenmiller, Henry Kravis, Ken Langone and Cliff Asness are set to host a fundraiser for Nikki Haley’s presidential campaign in New York on Jan. 30, according to an invitation seen by Bloomberg News. What’s in store for markets if Trump is re-elected? Meanwhile, Wall Street has already begun to calculate the impact of Trump’s possible return to the White House. Early assessments suggest that the former president’s tariff and tax plans if re-elected could put upward pressure on bond yields, strengthen the dollar and weigh on the currencies of trading partners. Citigroup Global Markets G10 FX Strategy Director Daniel Tobon said markets will be more prepared this time around and do not expect a 2016-like surge. Deutsche Bank strategist Alan Ruskin said the “Trump effect” is negative for major currencies such as the euro, yuan and Mexican peso, and positive for the dollar. “Investors are aware that Trump’s impact on trade and geopolitics is positive for the dollar, at least initially,” Ruskin said. Even if the Fed cuts interest rates as sharply as expected, elections will likely keep the dollar in range this year and into 2023, strategists at Deutsche Bank said, adding that “as election risks rise, safe-haven demand for the dollar is likely to continue throughout the year.” In a note to clients, Dominic Wilson and Vickie Chang of Goldman Sachs also said it appeared more likely that Republicans, not Democrats, would win control of both the White House and Congress. Such a development could keep the Fed on alert for potential overheating in the economy, potentially resulting in higher yields, especially on long-term bonds, they predicted.