With all new Presidential administrations, there are usually some policy changes as governments announce economic measures to prepare global markets for a new term.
What’s different about this term? For the first time in over 50 years, the current President of the United States is now part of a small group of ex-presidents who have won a second non-consecutive term.
Most countries then knew what to expect from his manifesto, since his first term brought sweeping changes to trade, leading to big moves in stocks, bonds, and even crypto.
So, what did we learn from the first year in the White House as we step into the new year?
Let’s start with crypto
As mentioned, crypto, and more specifically Bitcoin, had a year to remember. Hitting over $100k for the first time and remaining bullish, even though there have been some pullbacks in price action.
But was this surprising? Casting our minds back to Donald Trump’s first election win, Bitcoin was trading at just over $700. By the end of 2017, it had jumped close to $20,000.
Bitcoin’s reaction to Trump’s first term saw a meteoric price rise, and we have witnessed the same again with his re-election, as the Republican Party in general seems more crypto-friendly.
Bitcoin saw a $20K jump in price action after Trump was re-elected for his second term
What about the Stocks and Bonds?
Well, good question. Because one year on, the US stock market continues to notch record after record, with all three major indices reaching fresh highs as the tech and AI sectors continue to flourish.
The Dow, for example, has moved by over 10,000 points in the past year. In addition, the Treasury market has also advanced. Despite concerns about deficit numbers, investors have flocked to government bonds, which have helped the Federal Reserve make decisions on its monetary policy, such as cutting rates.
So, was it a year to remember?
Well, it depends on which way you look at it. Yes, stocks have continued to fly, but it wasn’t all plain sailing last year as a ‘trade war’ developed as tariffs were implemented.
Did the markets react to new tariffs?
As you would expect, the markets were a bit shaken when Donald Trump announced sweeping trade policies, which led to aggressive tariff increases.
Economic sentiment fell, and global markets witnessed violent selloffs, with the S&P 500 falling over 15% in April as Trump rolled out his plan for tariffs. It wasn’t only the American markets that were affected. Asian and European markets sank amid fears of retaliatory tariffs and reduced trade flows.
But as markets tumbled, the Trump administration walked back its most severe proposals, fearing they would trigger a global trade correction.
The S&P corrected, but quickly recovered as trade tariffs were rescinded
How about the Metal market?
Gold and Silver have continued to outperform in the past year, hitting new peaks. But is this because of the Trump Administration? Most economists would probably say no, since gold, in particular, tends to rise in times of economic uncertainty, and there’s been a lot of that recently.
The ongoing conflict between Ukraine and Russia has added to the latest crisis in Venezuela, pushing gold higher.
But looking past that, Copper prices experienced wild swings during the tariff saga, initially dropping but then jumping to record highs.
So, what’s next?
Not many investors saw a market victory for Donald Trump, but the overall outlook is showing a glowing picture.
With indices propelled by big tech and AI, corporate earnings are betting big on these sectors, leaving investors open to enormous gains but vulnerable to large downturns.
As the President walked back on most tariffs, it doesn’t mean they won’t return. Most traders do not expect a smooth ride this year, especially with stocks trading at historically expensive levels, a potential correction could be just around the corner.
