US equity futures slipped while the dollar weakened ahead of Donald Trump’s inauguration. Bitcoin soared to a record.
Trump is expected to unleash a barrage of executive orders on his first day in office, including decrees on immigration, tariffs and energy, as part of a sweeping effort to quickly implement his policy agenda upon taking office. While many investors expect those interventions to be business-friendly, they’ll also introduce a note of unpredictability.
“It’s going to be extremely volatile in the coming days since it’s now confirmed that there’s going to be a lot of decrees signed in the hours following the inauguration,” said Enguerrand Artaz, fund manager at La Financière de l’Echiquier. “I think that the rebounding trend will prevail after some volatility.”
Even before taking office, Trump is moving markets. His plan to invoke emergency powers in order to boost domestic energy production, while shifting away from renewable sources, sparked declines in Siemens Energy AG, Enel SpA and Vestas Wind Systems A/S.
Bitcoin jumped as much as 5.5% after the president-elect and his wife Melania unveiled their own memecoins over the weekend. Trump’s conversation with China’s leader Xi Jinping — which he described as “very good” — boosted Asian stocks on Monday.
With Wall Street closed Monday for a holiday, S&P 500 futures dipped 0.1% and those on the Nasdaq 100 erased earlier gains to trade flat. A gauge of the dollar slipped for the first time in three days, though it remains close to the 13-month high it reached earlier this month. The Stoxx Europe 600 index fell 0.2%, weighed by losses in utility shares.
The potential for Trump to unleash additional fiscal stimulus, from lower taxes to higher tariffs, may keep the dollar strong and Treasury yields elevated. For one, Nomura Holdings Inc. has joined T. Rowe Price in seeing a chance of 10-year Treasury yields rising to 6% this year, while a small group of bond traders believe the Federal Reserve’s next move on interest rates will be to increase them, contrary to the majority view that rates will be cut.
“Any further stimulus that sparks a growth and inflation shock could lead to a Fed rate hiking cycle, for which markets are largely unprepared,” Iain Stealey, international CIO for fixed income at J.P. Morgan Asset Management, wrote in a note to clients.
Trump’s stance on issues including the tech rivalry with China and climate change also will likely affect investment decisions on sectors from semiconductors to electric vehicles, and shipbuilding.
“One thing is 100% certain: Trump wants to keep the US stock markets in a good mood,” said Dana Malas, a strategist at SEB. “There will be a strong growth- and business-focused policy (for the US), with inflationary elements, and expect abrupt shifts under the motto that agreements are there to be broken.”
The stronger appetite for risk assets in Asia came after Trump and Xi discussed trade, TikTok and fentanyl, which may set the tone for relations in the early days of the new administration.
Adding to the brighter mood, TikTok started restoring service in the US on Sunday as Trump said he would halt enforcement of a law requiring the app’s Chinese owner to find a buyer for three months.
Later in the week, the focus will shift toward the Bank of Japan’s scheduled policy decision on Friday, with about three quarters of economists in a Bloomberg survey expecting it to hike its key rate.
The World Economic Forum’s annual meeting gets underway Monday. Among the group of billionaires set to join the pilgrimage of the rich and powerful to Davos, Switzerland are Larry Fink, Ray Dalio and Marc Benioff. Trump will speak virtually to the gathering three days after his inauguration.
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