Stock markets rose on Monday after the assassination attempt on former President Donald Trump as investors priced in the growing likelihood of him winning.
Analysts are calling it the “Trump Trade” because all asset classes are expected to perform better if Trump becomes president. Even before Saturday’s assassination attempt, investors had been predicting that certain assets, including cryptocurrencies, the dollar and some oil stocks, would benefit from Trump’s reelection. And now, Wall Street seems much more confident in predicting that Trump will win the election.
But one analyst said Monday’s rally doesn’t signal the market is safe.
“History shows, rather, that long-term political violence in democratic societies terrible “This presents a significant challenge for markets and risk taking,” Thierry Wisman, global currency and rates strategist at Macquarie Bank, said in a note published on Monday morning.
He cited the examples of Italy’s “Age of Lead”, which lasted from 1968 to the mid-1980s, and the Northern Ireland conflict, which lasted from the late 1960s to 1998. Italy’s “Age of Lead” was marked by a long political conflict between neo-fascist and communist terrorist groups, and culminated in several bombings and the kidnapping and assassination of Prime Minister Aldo Moro in 1978. The Northern Ireland conflict saw Protestants and Catholics locked in guerilla warfare over whether to remain in the UK, resulting in the loss of 3,600 lives.
Ultimately, these two turbulent periods were marked by declining investment, a brain drain as talented people left for jobs overseas, and a decline in tourism, Wisman said.
If political violence continues here, foreign investors will think twice about the U.S. “From an outsider’s perspective, the U.S. will no longer be a good place to invest or set up a business,” he said. luck In an interview.
And because the United States is the world’s largest economy, any problems it faces will have far-reaching global implications than those in Northern Ireland or Italy. If the U.S. economy is hit by ongoing political violence, the effects will “ripple around the world,” affecting global trade, the global defense industry, and the protection of international law, according to Wisman.
“We’re the largest developed democracy and economic power in the world, so this is really unprecedented,” he said.
Wisman added that the U.S. economy also faces persistent inflation, which could be exacerbated by political violence.
Markets have long expected that a Trump victory would bring about corporate tax cuts, tariffs on foreign goods, renewed deregulation and higher inflation. This has been reflected in rising Treasury yields whenever Trump looks set to prevail, such as after Saturday’s assassination attempt. On Monday, the 30-year Treasury yield reached parity with the 2-year note, and both are now hovering around 4.46%, Wisman wrote in a note. Bond yields also rose after President Joe Biden’s historically weak presidential debate in June, raising the odds of a Trump victory in November.
Wisman emphasizes that the rise in bond yields is the result of Trump’s likely favorable election results, not the possibility of political violence. Indeed, bond prices tend to rise during periods of political unrest, which in turn causes yields to fall, as investors flock to bonds as a relatively safe asset.
In the wake of the assassination attempt, political leaders have stressed national unity. President Biden addressed the nation twice over the weekend, on Saturday and hours after the attack on Trump, and on Sunday from the Oval Office. “Unity is the hardest goal to achieve right now here in America, but nothing is more important to us right now than unity,” Biden said Sunday.
Trump also struck a tone encouraging unity: “Now more than ever it is important that we come together, show our true character as Americans, and stand strong and resolute and do not let evil win,” he wrote on his Truth social account, denouncing the ongoing criminal investigation.
