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Trump returns to the White House - Hurrah?

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Crypto enthusiasts are celebrating: Donald Trump has won the election with a significant lead, thus becoming the 47th president of the United States. Although he will be inaugurated on January 20, 2025.

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Most digital assets have soared, hoping that regulation, including the SEC, will be more lex under the new administration. For example, Bitcoin’s price surpassed its all-time high this morning, reaching $82,000.

Whether and for how long the rally continues depends on Trump’s keeping his promise to make the U.S. the global hub for digital assets, and investors seem to believe he can do that, at least for now.

The stock market also posted gains: the S&P 500 closed the week up 4.6%, while the Dow Jones and Nasdaq Composite rose 4.6% and 5.3%, respectively, despite the DXY surpassing the 105-point barrier.

This optimism is apparently due to expectations that the new administration will implement tax cuts and lighter regulations and try to improve the competitiveness of domestic companies.

The problem is that if Trump imposes tariffs above 50% and starts deporting illegal immigrants, this could increase inflation, forcing the Fed to revise its dovish bias toward hawkishness.

It is worth mentioning that the probability of a December rate cut has already fallen to 64%, down from 80% before the election, while bond yields remain higher than they were a couple of months ago.

Even the Fed’s rate cut of 25 basis points last week has not helped much. Had the central bank given clearer signals about the future, the situation probably could have been somewhat different.

Jerome Powell just acknowledged that rate increases have been slightly higher than expected but reiterated that the Fed remains on track to lower rates. However, the pace of cuts remains uncertain.

The bottom line is that although the market is in a moment of euphoria, risks remain.

 

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