Donald Trump’s Presidency and Its Immediate Impact on Financial Markets

Donald Trump's inauguration as president has triggered significant movements in the financial markets. Investors' reactions to his first executive orders raise questions – particularly with regard to the impact on equities, bonds, gold and Bitcoin.
 
Financial markets are sensitive to uncertainty. This seems to be receding somewhat now that Trump is in the White House, as investors are getting a clearer idea of what the new president actually wants to implement. Despite possible inconsistencies in his political decisions, he has been remarkably active in signing executive orders.
 
Shortly after taking office, Trump signed a series of decrees concerning migration at the Mexican border, increased extraction of oil and gas, and withdrawal from the World Health Organization (WHO). Markets reacted positively because many of the punitive tariffs announced by Trump are not yet explicitly included in the initial decrees. Trump intends to start imposing tariffs on Mexico and Canada in February. The financial markets are currently bracing themselves for Trump's start and the consequences of his decisions.

Equity market: an insight into Trump's influence

What impact will Trump have on the economy? The answer to this question remains unclear, as he is considered to be highly unpredictable. Nevertheless, we are currently seeing very strong tendencies for the continuation of last year's strong upward trends. In particular, the Dow Jones Index and the broad S&P 500 Index have been showing enormous upward momentum again since Tuesday.
 
The optimistic basic expectation that a business-friendly President Trump could have a positive impact on the market was already clear before the election, but now it remains to be seen whether such a business-friendly policy will actually be implemented. Although there are prospects of lower corporate taxes and stronger domestic production in the US, the threats of tariffs and rising inflation pose a risk for the US stock market.
 
The reaction of the DAX was surprisingly positive. The German leading index quickly climbed above the 21,000-point mark on Monday. At a second glance, however, it is not as unexpected. While the markets around the US election expect an optimistic scenario for the US stock markets, they have assumed a negative scenario for Europe in Germany. Meanwhile, however, the majority of investors seem to believe that large German companies will be able to cope with Trump's policies. Many companies are actively preparing for a protectionist US policy, which could even benefit them if Trump takes a tougher line against China.
 
While stock markets continue to rise across the board despite Trump's unpredictability, the price of gold is following a similar trend: it is rising. Shortly before the inauguration, the gold price in euros reached a new record high of over 2,645 euros per troy ounce. Even after a brief setback, it rose again on the day of the inauguration. Investors apparently continue to see gold as a safe haven, especially in view of the continued uncertainty regarding inflation in the US.
 
We already have a clear idea of where the markets will move this year and in subsequent years. We have laid the most important groundwork, particularly in the past year, and will continue to do so consistently this year. We are already certain that this year we will continue to generate extremely high returns through our solid investment strategy, which, as in previous years, will be well over 20%.

Bonds: Inflation and the economy as influencing factors

On the bond market, yields have fallen since Trump took office. US government bonds with a remaining term of ten years are currently yielding 4.57 per cent, having recently been above 4.8 per cent. This means that investors are once again investing more heavily in US government bonds. This demand is leading to rising prices and falling yields.
 
Yields on bonds from other countries, such as German Bunds, have also fallen and are now back below 2.5 per cent. In the past, these yields were somewhat higher. Recently, yields on French bonds have also fallen.
 
Last week, yields rose sharply, particularly on US 30-year bonds, which temporarily exceeded the 5 per cent mark. However, positive US inflation data has now calmed the markets, giving them hope that prices will stabilise. Nevertheless, the question remains as to how the market will develop in the long term. Trump's economic policy plans could further fuel inflation and make interest rate cuts in the US less likely.
 
At the same time, the European Central Bank (ECB) could cut its key interest rate as early as its next meeting in January. However, bond yields have increasingly decoupled from central bank decisions, making it likely that the upward trend in yields could continue.

Cryptocurrencies: Are expectations too high?

During the election campaign, many crypto investors pinned their hopes on Donald Trump. He had spoken out in favour of relaxed regulation of cryptocurrencies and emphasised that he wanted to make the US the leading nation for Bitcoin. Expectations were correspondingly high that Trump would take significant measures for the crypto world at the beginning of his term of office, such as introducing a national Bitcoin reserve. Before his inauguration, Bitcoin reached a new all-time high of over $109,000.
 
But Trump's first official acts did not deal with cryptocurrencies. In his inaugural address, he largely avoided this topic. This led to a rapid correction in the Bitcoin price, which fell to below $100,000.
 
If Trump's influence on the crypto market turns out to be less than expected, many cryptocurrencies, especially smaller ones like Ripple (XRP), could suffer price losses. XRP had previously gained due to speculation about a possible withdrawal of a lawsuit by the US Securities and Exchange Commission (SEC), but fell back significantly after Trump's inauguration. The Memecoins introduced by Trump and his wife Melania also recorded losses after an initial high.
 
We will see whether expectations of Trump are too high or whether measures will be taken that will have a correspondingly positive effect. Throwing in the towel now and assuming a decline in cryptocurrency prices could be a fatal mistake that can take revenge very quickly.
 
In addition to short-term downside risks, we see the crypto market as a whole in a stable and strong upward trend that could continue for a very long time. Perhaps we are even at the beginning of an extremely long bullish phase for some coins.
 
Disclaimer/Risk warning:
The information provided here is for informational purposes only and does not constitute a recommendation to buy or sell. It should not be understood as an explicit or implicit assurance of a particular price development of the financial instruments mentioned or as a call to action. The purchase of securities involves risks that may lead to the total loss of the capital invested. The information provided does not replace expert investment advice tailored to individual needs. No liability or guarantee is assumed, either explicitly or implicitly, for the timeliness, accuracy, appropriateness or completeness of the information provided, nor for any financial losses. These are expressly not financial analyses, but journalistic texts. Readers who make investment decisions or carry out transactions based on the information provided here do so entirely at their own risk. The authors may hold securities of the companies/securities/shares discussed at the time of publication and therefore a conflict of interest may exist.