Trump 2.0: How Markets Are Reacting

We’ve now had four full trading days for the markets to react to Trump 2.0—Make America Great Again, Again—and, for some market participants, the impact has been far less severe than anticipated. Traders in CAD, MXN, and CNH markets may strongly disagree with that assessment, but overall, we’ve observed fairly orderly conditions and some solid trends worth capitalizing on.

Looking ahead, traders are focusing on a few key assets expected to see movement in the coming days and weeks as we navigate the new governing regime:

Dollar

FX traders are closely monitoring updates from Donald Trump and key members of his administration on how aggressively and swiftly tariffs will be implemented. In general, the consensus is that harder and faster tariff implementation will strengthen the dollar, while a more moderate approach could lead to further pullbacks for the greenback.

Treasury Yields

The story for treasury yields mirrors that of the dollar, as many anticipated policies are expected to drive inflation and, consequently, push yields higher. Confirmation of regulatory easing and tariffs could fuel further increases in yields, while less inflationary signals could result in sharp repricing within the bond market.

Stocks

U.S. stock markets have had a strong week, bolstered by Trump’s plans to increase spending and roll back regulations. The S&P 500 hit a record high in overnight trading, with the Nasdaq and Dow Jones also nearing all-time highs. So far, fears that Trump’s policies could trigger significant inflation and prompt the Federal Reserve to pull back or halt its easing cycle have not materialized. However, traders are keeping a close eye on the situation, anticipating potential volatility and sharp corrective moves.

Oil

Oil prices have experienced dramatic swings over the past few days, particularly with West Texas Intermediate (WTI) plunging after Trump declared a National Energy Emergency and requested OPEC+ to cut prices globally. Traders expect more volatility in “black gold” as the market seeks clarity on recent developments and grapples with ongoing geopolitical factors.

Gold

Gold has rallied to new highs over the past few trading days as markets continue to seek clarity on tariffs from President Trump and the new administration. Tariffs played a significant role in driving market movements after the Republican victory in November, and the current lack of transparency has fueled strong flows into gold, the ultimate safe-haven asset. Traders anticipate continued volatility, especially as gold approaches its all-time high. Increased uncertainty will likely push prices higher, whereas clearer guidance—particularly on tariffs—could lead to a pullback as the dollar strengthens.

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