Jefferies in its latest GREED & fear said Donald Trump's winning the second term as the US president is the greatest political comeback in American history. Taking a note of 'The comeback kid' and 'animal spirits', it said the initial reaction of the financial markets to Donald Trump’s decisive victory in the electoral college, as well as more surprisingly in the popular vote, is what GREED & fear expected -- the US dollar is up, the stock market is up and the US treasury bond market is down.
Dollar As for the dollar, the 47th president-elect’s policy agenda is long-term bearish for the dollar, even though the initial pro-growth orientation will be viewed as dollar positive, Jefferies said.
US stock market "As for the US stock market, if the short-term is positive in terms of the expectation of tax cuts extended and a deregulatory wave as animal spirits are unleashed, the risk for equities is clearly that at some point the stock market will not be able to ignore rising bond yields; though it also has to be admitted that it has done a very good job of doing just that so far," Jefferies said.
The other negative for equities is that the liquidity situation has begun to deteriorate at a time when valuations are at historic highs, Jefferies said.
Bitcoin Jefferies said Trump also championed Bitcoin during his campaign, including establishing an official US Bitcoin strategic reserve. Trump said he would establish a national 'stockpile' of Bitcoin using the Bitcoin the US government currently holds that was largely seized in law enforcement actions.
"The US government currently holds about 208,000 Bitcoins, or 1 per cent of the total maximum supply of Bitcoin of 21m. This is presumably why Bitcoin rose to an all-time high. GREED & fear will retain the 5 per cent allocation to Bitcoin in the GREED & fear global long-only equity portfolio," it said.
Gold GREED & fear also remains constructive on gold where the latest data from the World Gold Council has confirmed that central banks remained net buyers of gold in the third quarter though at a reduced pace than preceding quarters. Thus, central banks have bought a net 694 tonnes of gold in the first three quarters of 2024, though the net purchases declined from 305 tonnes in Q1 2024 to 186 tonnes in Q3 2024, it said. Indian stock market Jefferies said it views the recent stock market correction as healthy, most particularly as it has impacted the most expensive part of the market, while the relatively inexpensive private sector banks have started to outperform of late amidst expectations of a potential cut in the cash reserve ratio (CRR) by the Reserve Bank of India in coming months, it said.