Cycle Capital: The impact of the US election on asset prices and the main logic of 'Trump Trade”

1. Overview of the General Election

On June 28, Beijing time, Biden and Trump held the first debate of the 2024 election. Trump clearly had the upper hand, while Biden performed poorly. This has triggered widespread concerns among the public about their mental competency in their advanced age. Trump's approval rating surged after the debate. At the same time, Trump also has an overwhelming advantage in swing states, leading in the seven main swing states (North Carolina, Arizona, Georgia, Nevada, Wisconsin, Michigan and Pennsylvania).

来源：https://www.realclearpolling.com/polls/president/general/2024/trump-vs-biden

There are three more critical points in the future election:

1) Bipartisan National Convention: The Republican National Convention will be held on July 15-18, 2024, and the Democratic National Convention will be held on August 19-22 Select the party's presidential and vice-presidential candidates respectively.

2) Second round of candidate debate: September 10, 2024.

3) Presidential election day: November 5, 2024.

2. Main Policy Differences

Trump and Biden have relatively consistent views on infrastructure, trade, diplomacy, expanding investment spending and encouraging the reshoring of manufacturing. However, they have relatively different policies on finance and taxation, immigration and new energy industries. big.

1) Finance and Taxation

Trump advocates continuing to reduce the corporate income tax from 21% to 15%, and does not advocate directly increasing fiscal expenditures; while the "Balancing Act" promoted by Biden advocates for enterprises and The wealthy class raises tax rates, raising the corporate tax rate to 28%, while continuing to forgive student loans. During the last administration cycle, Trump’s tax cuts boosted U.S. stock profits and facilitated the repatriation of overseas capital. The tax cuts proposed in this round of elections are weaker than those in the past (the last round of tax reform adjusted the tax rate from 35% to 21%). The boosting effect is also relatively weaker than in the past. CICC estimates that the net profit growth rate of the S&P 500 Index in 2025 can increase by 3.4ppt to 17% from the market consensus expectation of 13.7%.

2) Immigration

Illegal immigration in the United States has increased significantly since Biden was sworn in in 2021. Compared with Biden's moderate immigration policy, Trump advocates continuing to tighten immigration policies, but relatively relaxing the requirements for "high-level" talents. Tightening immigration policy may weaken the momentum of U.S. economic growth and push wage growth to accelerate again.

3) Industrial policy

The two have big differences in areas such as energy. Trump advocates returning to traditional energy, accelerating the issuance of oil and natural gas exploration licenses, and increasing the development of traditional fossil energy to ensure the United States' cost leadership in energy and electricity. At the same time, green subsidies for new energy vehicles and batteries may be canceled; Biden It advocates continuing to promote the development of clean energy.

4) Trade Policy

Both Biden and Trump have implemented high tariff policies, which may push up the cost of imported raw materials and commodity prices in the United States, thereby creating resistance to the downward trend of CPI. The two are more radical than Trump’s policies. Biden announced in May that he would impose additional tariffs on Chinese imported goods. Biden's additional tariffs only cover US$18 billion in goods, and some of the additional tariffs will not be implemented until 2026. Trump stated that he would impose a 10% base tariff on goods entering the United States, while imposing additional tariffs of 60% or higher on China, and would also impose "specific taxes" on certain regions or industries.

You can find that Trump has significantly more green arrows in the picture above. His tariff policies, domestic tax cuts and immigration policies are not conducive to the fall of inflation.

3. General characteristics of asset prices in election years

First of all, from a full-year perspective, the overall market performance and the change in the federal funds rate during the election are not significantly different from those in other years.

按季度和月份看，在大選前期（主要指大選年3季度），聯邦基金利率的變化幅度要明顯小於其他季度，而資產價格則在此期間表現出更高的波動率。背後的原因可能是貨幣政策在大選臨近為了避嫌傾向於按兵不動，而資產價格由於大選結果的不確定性產生波動。與非大選年10~12月往往較強的季節性法則相反，大選前的10月股價表現明顯弱於非大選年份。

四、川普上輪當選後市場狀況回顧

2016年11月9日，美國總統選舉初步結果揭曉，‌共和黨總統候選人唐納德·川普‌贏得總統選舉，‌成為美國第45任總統。當時川普勝選超出市場預期引發資產價格波動，市場押注“Trump Trade”，2016年11–12月呈現高美債利率、強美元和強美股，預期消化後交易衰減。以下是各類資產當時的價格變動（皆為週線圖）。

美債殖利率走高後回落

對應美債殖利率走高後回落

對應美債殖利率走高後回落

對應美債殖利率

本輪「Trump Trade」開啟時間大大提前，第一次候選人辯論後市場對川普勝選預期明顯增強，市場開始提前佈局「Trump Trade」。 10年期美債殖利率在辯論第二天最高上漲至4.5%附近。

疊加7月14日川普遭遇槍擊事件可能為其帶來的額外選票，最有可能的結果是川普當選總統並且共和黨掌控參眾兩院，可以預見週末川普遭遇槍擊事件將為即將到來的周一美股帶來上漲行情。

五、總結

美國大選對市場的影響：

1）大選本身不能作為交易看漲的理由，民主黨為了贏得大選所以需要美股保持上漲的樸素邏輯並不成立；

2）常規大選年100月份前後市場因波動性增加而有下行風險；

3）交易大選結果（Trump Trade）主要的方向為多CPI、多美債利率（這裡「多」是相對於市場向下的預期而言，其意義為對CPI和美債利率下行產生阻力而非絕對上漲）、空黃金、多美股但力度沒有上次特朗普當選時大；多BTC（認為BTC更多地是跟著美股走，與美股的背離情況在長期不具備持續性&特朗普crypto友好）。

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