A Win for Republicans Boosts US Stocks

Economic

Stocks

Summary:

Marc Pinto, Head of Americas Equities, and Lucas Klein, Head of EMEA and Asia Pacific Equities, say a surprisingly straightforward U.S. election could provide additional momentum to U.S. stocks through the end of 2024.

Investors have spent much of 2024 trying to make sense of the U.S. election and the implications for markets. Now they’re getting answers — and quickly: Donald Trump has secured a second term as president, the Senate majority has flipped to Republicans, and the race for control of the House remains tight. It’s a strong victory for Republicans and a win for equity markets as election uncertainty gets removed.

On election night, U.S. stocks were clear beneficiaries. S&P 500® futures rose as votes were being tallied, as did contracts tied to the Russell 2000 Index, the benchmark of small-cap U.S. companies. The positive momentum spread globally, with select ex U.S. markets also rising as the election outcome crystalized.

Trump is viewed as supporting lower corporate tax rates, deregulation, and industrial policies that favor domestic growth, all of which could provide more stimulus to the U.S. economy and benefit risk assets. These policies could also lead to a stronger dollar, which would be a boon for U.S. small-cap firms with a domestic focus. During the 2016 election, the S&P 500 Index gained nearly 5% from the day before the presidential election through the end of the year in what became known as the Trump rally.1 We expect a similar trend could play out this time around, too.

Implications for markets

Longer term, though, history shows equity markets are more likely to be indifferent to whichever party is in power. A Republican-led White House and Congress has been just as likely to see positive equity returns as a Democrat-led or divided government (Figure 1). That’s because over the long term, what tends to matter most for stock returns are not elections but factors such as corporate earnings, economic growth, and interest rates.

A Win for Republicans Boosts US Stocks_1

The good news on that front: All have been trending positively in the U.S. In the third quarter, the U.S. economy grew at an annual rate of 2.8%, continuing a more-than two-year run of expansion.2 In September, the Federal Reserve kicked off a rate-cutting cycle that could continue into next year should inflation remain contained. And earnings for the S&P 500 are projected to rise ~15% in 2025, up from an estimated 9% for 2024.3

Next steps for investors

That’s not to say the election is inconsequential. We will get the first measure of the new government early next year, when lawmakers must agree to raise the debt limit (the total amount of debt the U.S. is allowed to accrue, as determined by Congress) or risk the country defaulting on its obligations. Meanwhile, the 2017 Tax Cuts and Jobs Act — which was signed into law under Trump and reduced tax rates for individuals and corporations — is set to expire by the end of 2025.

To that end, we could see bouts of volatility if a Republican mandate results in extreme measures. Trump, for example, has proposed not only extending the 2017 tax cuts but adding to them, which could exacerbate an already ballooning federal deficit. He has also promised to impose tariffs of as much as 60% on imports, which could work to fan inflation and lift Treasury yields. And markets that could be on the losing end of trade policies, such as China, could weaken.

We think the reality will be nuanced. For example, while fears exist about the impact of tariffs on non-U.S. markets, in aggregate, we believe they are overblown as they relate to Europe. We also think a strong dollar is generally quite positive for European and Japanese exporters. We covered other potential implications earlier this year, highlighting that areas such as financials might get less stringent regulatory oversight under Republican leadership and that a Trump administration could walk back tax credits for wind, solar, and electric vehicles.

Still, policy doesn’t always match campaign rhetoric, and even among Republicans, there are divisions on key issues. As such, we’d encourage investors to stay focused on bigger themes that have proven to be major drivers of markets lately. These include innovation in healthcare, productivity growth from artificial intelligence, and the rise of new manufacturing hubs in emerging markets. Ultimately, these and other trends, which look set to play out for years to come, could have more influence over which stocks outperform over the long term than any one election.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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WELLS FARGO

Economic

Tariffs & Taxes to Dominate the Post-Election Policy Outlook

Election Day 2024 finally has come and gone. Although the outcome of every race has not yet been determined, the outlook for control of Congress and the White House has become considerably clearer. Donald Trump has been elected President of the United States, becoming just the second person to serve two non-consecutive terms as president (Grover Cleveland was the first person to accomplish this feat. Cleveland was elected in 1884 and 1892).

In the Senate, Democrats entered the election with a 51-49 seat majority when including the three independents who caucus with the Democrats. Republicans picked up Senate seats in West Virginia, Ohio and Montana, with several more contested seats still undecided. Republicans appear destined for a majority of at least a few seats in the upper chamber of Congress, although this is not yet finalized. In the House of Representatives, Republicans possessed a 220-212 majority going into election night (three seats are currently vacant). Although some races are still too close to call, it appears more likely than not Republicans will hold onto their majority in the lower chamber of Congress. If realized, this would result in Republican control of both chambers of Congress and the White House for the first time since 2017–2018.

Because the dust has not yet settled on the election, we will not rush into any major forecast changes today. We will publish our 2025 Annual Economic Outlook (AEO) in about two weeks (November 21), and the AEO will contain an in-depth discussion of our post-election forecast for the U.S. economy. We will also be hosting a webinar that same day to discuss our annual outlook. But for now, we will walk through our preliminary thoughts on the recent election results and their implications for the U.S. economy.

Tax & Spend Policy

As a candidate, Donald Trump expressed support for a variety of new tax & spend policies. Some of these proposals came with concrete details, while others were more high-level and vague in nature. The Committee for a Responsible Federal Budget (CRFB), a nonpartisan think tank in Washington, D.C. that covers fiscal policy issues, published an exhaustive analysis attempting to quantify the costs and savings of Donald Trump’s campaign proposals. The table below summarizes this analysis, with the “high” and “low” estimates representing the range of potential outcomes depending on what exactly one assumes when nailing down the specifics of each proposal. In the CRFB’s central estimate, the cumulative budget deficit would increase by $7.75 trillion over the 10-year period starting in FY 2026 if all of Donald Trump’s proposals became law. If realized, this would amount to approximately 2.6% of U.S. GDP per year. Note that this estimate of $7.75 trillion would be in addition to the roughly $22.1 trillion cumulative budget deficit that the Congressional Budget Office (CBO) already projects the federal government will incur over the next decade under current law.

Figure 1

Of course, the table above shows a very broad range of estimates that contain a significant amount of uncertainty. Furthermore, just because a candidate proposes something does not mean it necessarily will become law. More often than not, most of a candidate’s campaign proposals do not make it over the finish line. Determining exactly what will become law in the immediate aftermath of an election is probably a fool’s errand, but what we can do is share the policy areas where we feel the most and least confident.

Republicans seem intent on extending the expiring parts of the 2017 Tax Cuts and Jobs Act (TCJA) that are scheduled to lapse at the end of 2025. We discussed the outlook for the TCJA and its potential economic implications in a recent report, and we would suggest our readers check out that report for a deeper dive into the outlook for U.S. tax policy. We feel reasonably confident Republicans will extend most or all of the TCJA, and an extension is already in our economic forecast. As a result, a full extension enacted some time next year, should that occur, would not have an impact on our forecasts for economic growth, inflation, the federal budget deficit, etc. Note also that a simple extension of the TCJA would not impart a fiscal impulse to the economy. Individual income tax rates would not be cut from their current levels. Rather, TCJA extension would prevent tax rates from rising back to their pre-2017 levels.

What about other, new tax cuts? We are more uncertain about the outlook for tax policy beyond TCJA extension. Some additional tax cuts seem probable in our view, although how large they are and what specific taxes are cut is difficult to say. As a starting point, the original TCJA cost $1.5 trillion on net over 10 years. New tax cuts of this size in addition to TCJA extension probably would lead us to upwardly revise our forecasts for real GDP growth and inflation by a couple of tenths of a percentage point in 2026 and 2027, all else equal.

Perhaps additional tax cuts could be even larger than this, but we note the fiscal realities at present are different from what they were in 2016 when Donald Trump last took office. Just extending the TCJA and leaving spending on its current trajectory would leave the gap between revenues and outlays historically wide in the years to come (Figure 2). Interest rates are elevated compared to the 2010s, and the United States is already running the largest structural budget deficit among its G7 peers (Figure 3). Furthermore, bear in mind that tax policy is an area where Congress will be involved heavily in the policymaking process. The president cannot unilaterally change federal income tax rates. This is in contrast to tariffs, the topic to which we turn next.

Figure 2

Figure 3

Trade Policy

During the campaign, President-elect Trump vowed to impose a 10% across-the-board tariff on America’s trading partners with a 60% tariff levied on China. As we wrote in a report we published in July, these tariff increases, if implemented shortly after Inauguration Day on January 20, would impart a modest stagflationary shock to the U.S. economy. Our model simulations show that the core CPI inflation rate next year would shoot up from its baseline value of 2.7% to 4.0% (Figure 4).1 The unemployment rate would rise from a baseline of 4.3% to 4.6% (Figure 5). If trading partners retaliate with their own equivalent tariffs on American exports—60% in the case of China and 10% for everyone else—the jobless rate rises even further to 4.8%. Under this scenario, U.S. real GDP would grow by a sluggish 0.6% in 2025.

Of course, President-elect Trump may decide not to impose tariffs so quickly upon taking office. He may reconsider given the potential drawbacks of the levies, or the administration may use the threat of tariffs as a negotiating tactic with foreign governments. The president also may decide to exempt certain products and/or countries. However, given Trump’s frequent mentioning of tariffs during the campaign and his previous use of levies in 2018–2019, which affected more than $400 billion of American imports, we advise readers to take the president-elect’s threats of tariffs seriously if not literally. Moreover, over the past few decades Congress has delegated significant powers to the president to act unilaterally in regard to trade policy. Therefore, the president would not need congressional approval to impose significant tariffs on America’s trading partners.

Figure 4

Figure 5

Given the uncertainty on the tariff outlook, our forecast will not fully adopt the results that are implied by the model simulations discussed above. These estimates are probably closer to an upper-bound than they are the midpoint of the range of possible outcomes. That said, we are inclined to push up our core CPI inflation forecasts for 2025, currently 2.7%, given the balance of risks. Note that the tariffs would directionally offset the boost to economic growth from tax cuts but would further add to the inflationary impulse from tax cuts for households. Thus, although we may reduce our economic growth forecasts for the next couple of years due to higher tariffs, tax cuts could serve as a mitigating factor. Finally, bear in mind that tariffs increase federal revenues, suggesting that they might help limit deficit widening that would result from extending and expanding the TCJA. Depending on the policies that are ultimately adopted, these changes could increase tariff revenue for the federal government by a few hundred billion dollars per year (Figure 6).

Figure 6

Federal Reserve & Monetary Policy

Our current forecast looks for the Federal Open Market Committee (FOMC) to cut its target range for the federal funds rate, currently 4.75%-5.00%, to 3.00%-3.25% by the end of next year. However, the FOMC may not want to ease policy by that amount if new tax cuts and tariffs cause inflation to shoot higher over the next couple of years. Thus, the risks to our fed funds rate forecast are skewed to the upside (i.e., less easing next year than we currently project).

In our view, it is important to remember that not all sources of inflation are created equal. The FOMC’s reaction function likely would be more hawkish in response to higher inflation from tax cuts than from tariffs. Fiscal stimulus via tax cuts likely would lead to faster economic growth and lower unemployment in the near term, while tariffs would reduce economic growth and increase unemployment. Tighter monetary policy is an effective method for slowing demand growth, but it cannot do much to combat supply-side pressure on inflation from tariffs. Put another way, both tariffs and tax cuts would increase U.S. inflation, but tighter monetary policy is a much more effective remedy for the latter than the former.

During his upcoming four-year term, President-elect Trump will have the ability to reappoint or replace Jerome Powell in May 2026 as the Chair of the Federal Reserve System (Figure 7). Additionally, Trump could reappoint or replace Philip Jefferson as the Vice Chair of the Federal Reserve (September 2027) and Michael Barr as the Vice Chair of Supervision (July 2026). As a candidate, Trump has said that the president should have a say in the monetary policy decisions of the Federal Reserve. Giving the president a vote on the FOMC would require a change in the Federal Reserve Act. We are skeptical that Congress would change the Federal Reserve Act in such a momentous direction. More likely, Trump could nominate individuals to leadership positions on the Federal Reserve Board who are sympathetic to the president’s monetary policy views. Those nominees would need to be confirmed by the Senate. Depending on the qualifications of those individuals, it is an open question at this point whether the Senate would confirm their nominations.

Figure 7

Immigration Policy

President-elect Trump has vowed to secure the nation’s borders and to deport undocumented immigrants, which the Pew Research Center estimates totaled 11 million individuals in 2022.2 The American labor force grew at an annual average rate of 1.6% in 2022–2023, the strongest growth rate in more than 20 years. As we noted in a report we published earlier this year, more than half of this supercharged growth rate was due to “foreign born” workers, many of whom undoubtedly are undocumented. As we also noted in that report, labor force growth is one of the primary determinants of a country’s long-term potential rate of economic growth. Therefore, policies restricting immigration and/or large-scale deportations would lead to slower labor force growth and, by extension, slower potential economic growth, everything else equal. There very well may be valid reasons to adopt such a policy. But, side effects of a policy that restricts immigration and deports undocumented people likely would be upward pressures on labor costs and a detrimental effect on the nation’s potential economic growth rate.

Unauthorized immigration is difficult to measure, but recent data from the Department of Homeland Security show that encounters at the U.S. border, a proxy for undocumented immigration, increased significantly over the past few years (Figure 8). However, monthly data show that encounters at the border have fallen sharply in recent months (Figure 9). Our forecast assumes labor force growth of 0.5%-1.0% in 2025 and 2026, much slower than the 1.6% pace that prevailed in 2022 and 2023. This forecast assumes that immigration into the United States continues to normalize relative to its surge over the past few years.

Thus, even if President-elect Trump uses executive authority to further tighten immigration restrictions, it may have a marginal rather than major impact on our forecast for the U.S. labor force and economy. Much more sweeping policy changes could occur if Congress were to legislate changes to the U.S. immigration system, but it is much harder to make changes to immigration law using budget reconciliation, in contrast to other more directly budget-related policy areas, such as taxes.3 Without budget reconciliation, any such bill would be subject to the 60-vote filibuster threshold in the Senate.

Figure 8

Figure 9

Conclusion: Some Uncertainty Removed, but Plenty Remains

The return of Republican control of Congress and the White House for the first time since 2017–2018 opens the door to potential policy changes that will impact our economic outlook. It goes without saying that there is tremendous uncertainty about what will be enacted over the course of the next two years under President-elect Trump and this Congress. Extending the TCJA seems quite likely, and additional tax cuts seem possible, although the size, timing and specifics are yet to be determined. Directionally at least, policy change along these lines would be consistent with more fiscal stimulus and faster economic growth and inflation over the next few years. If higher tariffs are also enacted, this would further boost our inflation forecasts in the near term, but it would dampen our economic growth outlook. On balance, we think the risks are skewed to the upside for our federal funds target range forecast for year-end 2025, currently 3.00%-3.25%.

We will publish our 2025 Annual Economic Outlook (AEO) in about two weeks (November 21), and the AEO will contain an in-depth discussion of our post-election forecast for the U.S. economy. We will also be hosting a webinar that same day to discuss our annual outlook. We would encourage our readers to tune in after we have fine-tuned our forecasts in the days ahead.

It goes without saying that there is tremendous uncertainty about what will be enacted over the course of the next two years under President Trump and this Congress.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Justin

Economic

Political

Americans in 10 states cast votes on ballot measures to protect or expand abortion access, and in seven, the measures for abortion rights won. That brings the total to 13 states approving abortion rights referendums since Roe v. Wade was overturned in 2022.

Ballot proposals sailed through on Tuesday not only in blue states like New York and Maryland, but also in red and purple states like Arizona, Nevada, Colorado, and Montana. Missouri, which was the first state to completely ban abortion after Roe fell, is now the first state to overturn a ban. All told, the pro-abortion rights measures passed on Tuesday will expand access for millions of women of reproductive age who live in those states, as well as thousands of others traveling from more restrictive areas for care.

The biggest loss of the night was undoubtedly in Florida, where advocates had raised more than $100 million to reverse the state’s near-total ban on abortion. The ban, which took effect this past spring, has decimated access not only for residents living in the third most populous state but also for people across the South who had been traveling to Florida since Roe was overturned. While a majority of Florida voters backed the proposal, which would have restored abortion rights up to the point of fetal viability — typically between 22 and 24 weeks of a pregnancy — Florida law requires at least 60 percent of voters to approve a ballot measure to pass.

This 60 percent “supermajority” threshold is simply a high bar for any referendum, and Florida’s earned 57 percent. Of all the winning abortion rights ballot measures that have passed in red or purple states since Roe’s overturn, none have reached that 60 percent level. In 2023, Republican lawmakers tried to raise Ohio’s ballot measure threshold to 60 percent precisely to make it harder for a pending abortion rights proposal to pass, and voters rejected the move. Ohio voters ultimately approved their abortion rights measure by 57 percent.

The other losses Tuesday night were in red states, like Nebraska, where voters were confronted with two (intentionally confusing) constitutional measures, and South Dakota, where reproductive rights groups didn’t help campaign for a ballot measure that would have overturned the state’s total ban. The ballot measure failed.

Ballot measures have become a powerful tool over the past 2.5 years, giving voters a direct way to challenge abortion bans and often cutting across partisan divides. Measures in red and purple states have won precisely because they’ve earned votes from individuals who otherwise cast ballots for Republicans, libertarians, or no candidate at all. On Tuesday, for example, voters in Arizona, Missouri, and Montana elected Donald Trump, but still cast their ballots in favor of abortion rights.

Anti-abortion groups were determined to end the clean winning streak of the abortion rights movement this year. The 2022 midterms were “a wake-up call that taught us we have a ton of work to do,” Kelsey Pritchard, the state public affairs director for Susan B. Anthony Pro-Life America, told Politico in the spring of 2023. “We’re going to be really engaged on these ballot measures,” she promised.

And indeed, anti-abortion leaders did lean in much harder this cycle, leveraging a range of new tactics. In Florida, for example, Republican Gov. Ron DeSantis actively attacked the proposed ballot measure for months, using his state agencies to help, including by threatening local television stations with criminal penalties if they aired ads in support of the abortion rights measure.

“Florida Governor Ron DeSantis deserves special recognition for taking the abortion industry head on and setting a new standard for what it means to be a Pro-Life Champion as a state’s chief executive,” said Carol Tobias, the president of National Right to Life, in a statement after Florida’s measure failed.

Still, in the end, proponents for abortion rights nationwide raised nearly six times as much as their opponents, according to a recent campaign finance analysis by the Associated Press. Abortion rights advocates spent more than three times as much as anti-abortion activists on TV, streaming services, radio, and websites, according to the AP.

“While we are disappointed with the Florida ballot measure election results not meeting the 60% threshold, we still saw the majority of Floridians voting in support of abortion access,” said Nourbese Flint, president of the pro-abortion rights group All In Action Fund. “This outcome is a direct result of anti-democratic tactics designed to undermine the will of the people and Floridians’ access to life-saving medical care.”

While organizers for abortion rights ballot campaigns have a lot to feel proud of, even in states that have approved measures, rights will not be restored immediately, and in some cases litigation is likely to follow. In Nevada, voters will need to reapprove their measure in 2026 to formally amend their constitution. Moreover, restoring legal rights is not the same as restoring access, and even in states with favorable laws many women still struggle to afford their abortion care.

Abortion rights looked potent, but it will take time to get a clear sense of what happened

Going into election night, it wasn’t clear how much abortion rights would matter to voters, compared to issues like the economy and immigration and crime. While it was clear it mattered to voters in the midterms, election experts say those voters — known as “high propensity” or “frequent” voters — tend to prioritize different issues from those who vote only once every four years. Roughly 160 million Americans cast ballots in the 2020 election, or 67 percent of the voting-eligible population. By contrast, just 112 million people voted in 2022, or 46 percent of those eligible.

It was also unclear how much ticket-splitting there would be this cycle, as polarization tends to ramp up in presidential elections compared to midterms. We still don’t yet know the gender or racial breakdown for Election Day voters, although early results indicated that women were turning out in higher numbers than men. Women voters make up a slight majority of the voting population, and advocates were banking on women being particularly motivated to protect abortion rights this cycle. We’ll continue to update our coverage as we get more information about how the votes broke down.

The 2024 election certainly won’t end the national debate around abortion. The election of Donald Trump to the White House, and Republican control of at least the US Senate, are setbacks for abortion rights advocates, who had hoped to restore access to care. However, the success of abortion rights ballot measures offers more hopeful signs and reaffirms the unpopularity of many state restrictions, even in states where referendums lost.

“Abortion rights are winnable in pretty much any state at this point,” said Joey Teitelbaum, a pollster with Global Strategy Group who has worked on nine state abortion rights ballot measure campaigns over the last three years. “People have been very clear about what side they are on, and just because a candidate or a ballot measure loses, it does not change that fact.”

Source:Vox

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Warren Takunda

Cryptocurrency

Bitcoin Open Interest (OI) surged to an all-time high as Bitcoin rallied to $75,000 and several analysts suggested there may be more upside ahead.

Bitcoin OI — a metric tracking the total number of unsettled Bitcoin derivative contracts such as options and futures — reached $45.4 billion, representing a 13.3% increase since Nov. 5, when Bitcoin’s price broke through its $73,800 all-time high set in March, according to CoinGlass data. Bitcoin Open Interest Tops Chart After Hitting $75K ‘Sweet Spot’_1

Bitcoin Open Interest Tops Chart After Hitting $75K ‘Sweet Spot’_1

Bitcoin Open Interest reached $45.41 billion on Nov. 6. Source: CoinGlass

OI increases when the number of new long positions opened by buyers or new short positions by sellers is more significant than the number of contracts closed on that day.

Traders don’t appear to expect Bitcoin’s price to retrace to the previous high of $73,679 anytime soon, with $1.26 billion in short positions at risk of liquidation if it does.

At the time of publication, Bitcoin was trading at $75,792, according to TradingView data, and analysts were speculating that the price is in an ideal range.

“Bitcoin is now in the sweet spot of the bull market halving cycle that should top in the $130k to $150K range next Aug/Sep. I measure cycles differently than most,” veteran trader Peter Brandt wrote in a Nov. 6 X post.

Analysts suggest Bitcoin has more room to grow

While Bitcoin reaching all-time highs often raises concerns among newer crypto investors about the asset being overvalued, not all analysts agree.

Crypto analyst Rajat Soni, for one, said it’s still early:

“We are so early in Bitcoin’s adoption that you can still exchange pieces of paper ($, €, £, etc.) for BTC because most of the world thinks fiat currencies are backed by something tangible.”

Echoing a similar sentiment, crypto analysis firm CryptoQuant said that Bitcoin is “not overheated” yet.

“Bitcoin’s new all-time high doesn’t mean it’s overvalued relative to its cost basis,” the firm said in a Nov. 6 X post. Bitcoin Open Interest Tops Chart After Hitting $75K ‘Sweet Spot’_2

Bitcoin Open Interest Tops Chart After Hitting $75K ‘Sweet Spot’_2

Source: CryptoQuant

The analysis firm added that Bitcoin’s Market Value to Realized Value (MVRV) ratio “is still far from peak levels.”

The higher the MVRV, the more it signals to traders that Bitcoin may be overbought. When Bitcoin reached its all-time high of $73,679 in March, the MVRV was around 2.87, according to Bitbo data.

At the time of publication, Bitcoin’s MVRV score was 2.19.

Source: Cointelegraph

Risk Warnings and Disclaimers

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Justin

Political

The 2024 presidential election is over — and Donald Trump is the victor. There is no doubt about the election’s legitimacy: Trump is on track to win the Electoral College by a wide margin, and potentially win the popular vote for the first time.

Yet while the election itself was clearly on the level, what comes next may not be. Having won power democratically, Trump is now in a position to enact his long-proposed plans to hollow out American democracy from within.

Trump and his team have developed detailed plans for turning the federal government into an extension of his will: an instrument for carrying out his oft-promised “retribution” against President Joe Biden, Vice President Kamala Harris, and anyone else who has opposed him. Trump’s inner circle, purged of nearly anyone who might challenge him, is ready to enact his will. And the Supreme Court, in its wisdom, has granted him sweeping immunity from his actions in office.

In nearly every conceivable way, a second Trump administration will likely be more dangerous than the first, a term that ended in over 1 million deaths from Covid-19 and a riot at the Capitol. A predictable crisis — a president consolidating power in his own hands and using it to punish his enemies — looms on the horizon, with many unpredictable crises likely waiting in the wings.

Yet as dire as things are, America has reserves it can draw on to withstand the coming assault. Over the course of the country’s long democratic history, it has built up robust systems for checking abuses of power.

America’s federal structure gives blue states control over key powers like election administration. Its independent judiciary stood strong during Trump’s first term. Its professional, apolitical military will likely push back against unlawful orders. Its politically active citizenry has a proven capacity to take to the streets. And America’s world-leading media will fiercely resist any effort to compromise its independence.

No country at America’s level of political-economic development has ever collapsed into authoritarianism. There are some reasonably close modern analogues, most worryingly modern Hungary, but even they are different in crucial respects.

This is not to make an argument for complacency or naive optimism. Quite the opposite: The next four years will be American democracy’s gravest threat since the Civil War; if it survives them, it will surely do so battered, bruised, and battle-scarred.

But this realism should not be cause for succumbing to despair. As grim as things feel now, it’s possible that — if people take the gravity of the threat seriously — the republic may come out intact on the other side.

Trump’s scary second-term agenda, explained

We do not know why, exactly, America’s voters have chosen to return Trump to high office. The data isn’t fully in, let alone analyzed in detail. But as murky as the electoral picture remains, certain elements of the policy future are crystal clear. Trump’s own comments, his campaign’s statements, and allied documents like Project 2025 give us a relatively coherent picture of what the agenda will be in the next Trump administration.

Much of it resembles what you’d see from any other Republican president. Trump will appoint corporate allies to lead federal agencies, where they will work to slash regulations on issues ranging from workplace safety standards to pollution. He has already proposed regressive tax cuts without off-setting hikes, which would increase the federal deficit in the same way as President George W. Bush’s fiscal policy did. He will likely take steps to curtail abortion access, end federal police efforts to rein in abusive police, and crack down on federal protections for trans people — all examples of how his agenda would hurt certain groups of people, typically already vulnerable ones, more than others.

Trump’s biggest breaks with his party in traditional policy areas will likely come on trade, immigration, and foreign policy. Trump has proposed a “universal” tariff on imported goods, a mass deportation campaign that detains suspected “illegals” in camps, and weakening America’s commitment to the NATO alliance. These policies would together be a recipe for economic decline, domestic turmoil, and global chaos — at an already chaotic time.

But perhaps the most dangerous Trump policies will come in an area that traditionally transcends partisan conflict: the nature of the American system of government itself.

Throughout the campaign, Trump has proven himself obsessed with two ideas: exerting personal control over the federal government, and exacting “retribution” against Democrats who challenged him and the prosecutors who indicted him. His team has, obligingly, provided detailed plans for doing both of these things.

This process begins with something called Schedule F, an executive order Trump issued at the end of his first term but never got to implement. Schedule F reclassifies a large chunk of the professional civil service — likely upward of 50,000 people — as political appointees. Trump could fire these nonpartisan officials and replace them with cronies: people who would follow his orders, no matter how dubious. Trump has vowed to revive Schedule F “immediately” upon returning to office, and there is no reason to doubt him.

Between a newly compliant bureaucracy and leadership ranks purged of first-term dissenting voices like former Defense Secretary Jim Mattis, Trump will face little resistance as he attempts to implement policies that threaten core democratic freedoms.

And Trump and his team have already proposed many of them. Notable examples include investigating leading Democrats on questionable charges, prosecuting local election administrators, using regulatory authority for retribution against corporations that cross him, and either shuttering public broadcasters or turning them into propaganda mouthpieces. Trump and his allies have claimed unilateral executive authority to take all of these actions. (It remains unclear which party will control the House, but Republicans will be in charge of the Senate for at least the next two years.)

Ultimately, all this executive activity is aimed at turning the United States into a larger version of Hungary — a country whose leadership and policies are regularly praised by Trump, Vice President-elect JD Vance, and Project 2025 leader Kevin Roberts.

Hungary still has elections and nominal free speech rights; there are no tanks in the streets or concentration camps for regime critics. But it is a place where everything — from the national elections authority down to government art agencies — has been twisted to punish dissent and spread the government’s propaganda. Every aspect of government has been bent to ensure that national elections are contests in which the opposition never has a fighting chance. It is a kind of stealth autocratization, one that maintains the veneer of democracy while hollowing it from within.

This is why the second Trump presidency is an extinction-level threat to American democracy. The governing agenda Trump and his allies explicitly laid out is a systematic attempt to turn Washington into Budapest-on-the-Potomac, to deliberately and quietly destroy democracy from within.

Democracy is not lost

It is important to remember that, as dire as things are, the United States is not Hungary.

When Prime Minister Viktor Orbán came to power in 2010, he had a two-thirds majority in the country’s parliament — one that allowed him to pass a new constitution that twisted election rules in his party’s favor and imposed political controls on the judiciary. Trump has no such majority, and the US Constitution is nearly impossible to amend.

America’s federal structure also creates quite a few checks on the national government’s power. Election administration in America is done at the state level, which makes it very hard for Trump to seize control over it from Washington. A lot of prosecution is done by district attorneys who don’t answer to Trump and might resist federal bullying.

The American media is much bigger and more robust than its Hungarian peers. Orbán brought the press to heel by, among other things, politicizing government ad purchasing — a stream of revenue that the American press, for all our problems, does not depend on.

But most fundamentally, the American population has something Hungarians didn’t: advanced warning.

While the form of subtle authoritarianism pioneered in Hungary was novel in 2010, it’s well understood today. Orbán managed to come across as a “normal” democratic leader until it was too late to undo what he had done; Trump is taking office with roughly half the voting public primed to see him as a threat to democracy and resist as such. He can expect major opposition to his most authoritarian plans not only from the elected opposition, but from the federal bureaucracy, lower levels of government, civil society, and the people themselves.

This is the case against despair.

As grim as things seem now, little in politics is a given — especially not the outcome of a struggle as titanic as the one about to unfold in the United States. While Trump has four years to attack democracy, using a playbook he and his team have been developing since the moment he left office, defenders of democracy have also had time to prepare and develop countermeasures. Now is the time to begin deploying them.

Trump has won the presidency, which gives him a tremendous amount of power to make his antidemocratic dreams into reality. But it is not unlimited power, and there are robust means of resistance. The fate of the American republic will depend on how willing Americans are to take up the fight.

Source:Vox

Risk Warnings and Disclaimers

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ING

Central Bank

Federal Reserve

We had previously looked for the Federal Reserve to cut its policy rate down to 3.5% by next summer on the view that the central bank felt it had scope to loosen policy closer to neutral, in an environment where the jobs market is cooling and inflation is less of a threat. However, the likely Republican clean sweep of the presidency, the House and the Senate gives Donald Trump the power to push ahead forcibly with his plans for immigration controls, tax cuts and higher tariffs on goods. This may generate a stronger growth story in the near term, but with more inflation pressures over the medium to longer term – which may make the Fed more reluctant to cut interest rates as far and as quickly as we had previously expected.

A 50bp cut in September and a 25bp move in November are still expected to be followed by a 25bp interest rate cut in December, but there is now a greater chance of a pause at the January FOMC meeting. Indeed, rather than cutting rates 50bp per quarter, we are now favouring 25bp per quarter from the first quarter of 2025 with rates perhaps bottoming higher than we previously thought at 3.75% in the third quarter of 2025.

This would still be above what we would term the “neutral” rate, which is itself likely to shift higher since the Fed may take the view that if fiscal policy is going to be kept looser by president-elect Trump relative to its previous baseline forecast, then it needs to run monetary policy tighter to keep inflation at its 2% target.

There may be some speculation that given Trump’s sweeping mandate he may choose to exert more influence or control over the Federal Reserve. Chair Jerome Powell would undoubtedly push back against this, thereby asserting the Fed’s independence. However, Powell’s term expires in February 2026 and Trump could nominate a candidate that is more willing to accommodate his views on interest rate policy.

That all said, the likelihood of rising term premium (resulting from inflation fears and large fiscal deficits) implies the prospect of a higher and steeper Treasury yield curve. This will push up both household and corporate borrowing costs and with the dollar likely to strengthen further, monetary conditions will become tighter. This may mean the Fed feels it doesn’t need to hike short-term rates in 2026 despite tariffs likely pushing inflation above target.

European Central Bank

October was the month of an important turnaround at the ECB. Instead of inflation concerns related to still-high and sticky domestic inflation, it seems that growth concerns have become the predominant factor driving monetary policy. As a result, the ECB has stepped up the pace at which it is reducing interest rates, and a further stepping up with larger sized rate cuts can no longer be excluded.

However, with eurozone GDP growth in the third quarter being higher than the ECB’s September projections (0.4% quarter-on-quarter vs 0.2%) and inflation rebounding in October, some ECB members might start doubting the chosen U-turn. Everything seemed as if the ECB’s December meeting would be affected by two main questions: were the disinflationary trends just halted at the end of October, or are they for real? And will the ECB acknowledge structural weakness in the eurozone economy, or continue believing in a return to potential growth from early 2025 onwards?

That was before the US elections. With the outcome now clear, risks to the eurozone growth outlook have clearly shifted to the downside and a 50bp rate cut at the December meeting has again become more likely. Even if the ECB normally doesn’t speculate about possible policy changes elsewhere, it would be almost irresponsible not to take the US elections into account. At least if the central bank wants to get ahead of the curve.

And getting ahead of the curve seems to be an important motive for the ECB currently. Having been slow to address rising inflation and arguably late in stopping rate hikes last year, it now appears determined to get ahead of the curve and return interest rates to neutral as quickly as possible. For the doves, this is a no-brainer, and for the hawks, the argument might be that getting rates back to neutral quickly could be enough to avoid another episode of unconventional monetary policy with quantitative easing and negative interest rates further down the line.

With the incoming Trump administration posing new economic risks for the eurozone, we now expect the ECB to cut interest rates to around 1.75% by next summer, below neutral levels. While this will be an attempt to support growth in the eurozone, the longer term inflation picture has not changed. ‘Greenflation’, demographics and changes to globalisation are still likely to push up price pressures over the longer term.

It clearly looks as if the ECB will be caught for a long while between disinflationary risks in the short term and inflationary risks in the long term.

Bank of England

The latest UK government budget, which saw big tax rises but even bigger spending increases projected for 2025-26, has forced markets to rethink Bank of England expectations. Rates are expected to stay above 4% for the next two years, which would mean considerably fewer rate cuts overall in this cycle than the ECB or the Federal Reserve.

Investors also seem to have concluded in the immediate aftermath of Donald Trump’s election that the assumed hit to European growth (which the UK isn’t immune to), will have a more marginal impact on the Bank of England's rate-cutting cycle, relative to the ECB.

We think this is misplaced. Services inflation, the key guiding light for the BoE, has been undershooting central bank projections. If that continues in the new year – and we think it will – then that is likely to be a catalyst for faster rate cuts through the spring.

Admittedly, we agree with markets that a December rate cut now looks less likely, though it remains possible should the two intervening inflation reports prove more benign than anticipated. Our base case is that the Bank will cut rates again in February, and at at every meeting thereafter until rates reach 3.25%.

Source:ING

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Economic

Political

Donald Trump will return to the White House, winning in a surprisingly easy and decisive manner. The contest was for all intents and purposes over by midnight on the east coast. Trump won the aggregate US vote and the Senate is now red. Whether the Democrats pick up the House as long expected remains an open question.

A post-inaugural Trump will launch his budget-busting tax cut plans backed by a legislative branch poised to offer strong support, hit foreign countries with tariffs and restrict immigration. Markets have already reacted decisively – US note and bond yields soared, the dollar surged and stocks and crypto are up.

The current debt limit suspension extends till early January 2025 and the Treasury will deploy ‘extraordinary measures’ to push out the day of reckoning well beyond Trump’s inauguration. Congress hasn’t passed a budget for this fiscal year, instead running on continuing resolutions. Trump aims to cut the corporate tax rate and extend the 2017 tax cuts that expire at end-2025. Next year promises to be quite active on the fiscal front with little regard to debt and deficits. The Committee for a Responsible Federal Budget projects Trump’s tax plans will add $8tn to US deficits – net debt is now close to 100% of gross domestic product and $28tn.

Tariff plans may prove a bit murkier. Trump has substantial power to raise tariffs on his own without Congressional consent, especially on national security grounds. His aides have been at a loss to tell the ‘inside the Beltway’ crowd that Trump is transactional, the US is treated unfairly and that Trump’s proposals for a 10% across the board and 60% China tariff shouldn’t necessarily be taken literally but are threats aimed at securing better deals for America.

Trump’s plans to deport immigrants in the US and restrict further immigration may be more difficult to implement on the ground. Undoubtedly Trump will use executive authority and perhaps the ‘terrible’ immigration deal that Congress was ready to pass earlier this year but Trump rejected could be revived and touted as a win.

Impact on the dollar

Budget-busting fiscal policy and tariffs sent the dollar soaring during the first Trump term. Markets reacted with a sharp surge in yields and the dollar, the latter contrary to Trump’s aims to reduce the US trade deficit, as OMFIF long ago foreshadowed.

With inflation practically back to 2% and the Federal Funds rate coming down, Trump with his usual chutzpah may claim that the Federal Reserve is already under his thumb. But in the face of soaring yields, a Trump administration might choose to jawbone the Fed and pressure for a return to large-scale asset purchases or some form of Japanese-style yield curve control – echoes of the pre-Treasury-Fed 1951 Accord. Fed Chair Jerome Powell is ensconced till early 2026 and governors rotate out slowly, while the selection of regional Fed banks isn’t particularly political. An executive branch clash with an independent Fed may be in the offing.

The real trade-weighted dollar is already extremely strong (Figure 1). It will now ascend towards its extraordinary 1985 pre-Plaza Accord heights, which triggered substantial protectionist pressure and calls for currency action. Despite Team Trump’s calls for ‘devaluing’ the dollar, the path for doing so is filled with obstacles. Team Trump has promised to preserve the dollar’s dominant global reserve currency role; that is baked in the cake as there is no near-term alternative, but proposals for dollar devaluation and a 100% tariff on those who shun the dollar fly in the face of the promise.

Figure 1. Real trade-weighted dollar extremely strong

Trump 2.0: a Surprisingly easy and Decisive Win_1

Source: Bank for International Settlements

Higher interest rates, a soaring dollar and restricting immigration is a recipe for lower long-term US growth after a shorter-term Trump expansionary fiscal sugar high ends.

But, as impactful as domestic economic policy changes may be, so are the foreign policy implications of Trump 2.0. The US focus on China will intensify amid rising tension, frostiness and conflict. More sanctions may become de rigueur. Trump will show little regard for Ukraine’s future and curtail US backing, double down on Israel Prime Minister Benjamin Netanyahu and cosy up to autocrats including Vladimir Putin.

Europe is already seen in the US as sclerotic, riven between nationalism and Brussels’ centralist pull, while taken for granted as an ally and partner. It may soon get short shrift, encountering neglect and prickliness.

‘Trump will clean up. It will be painful.’

European leaders reacted with private dismay but public calls for confidence in a continued robust US-European relationship. Ukraine faces renewed difficulties in amassing western support against Russia’s war of aggression. But few European politicians or diplomats believe Trump’s campaign rhetoric that he will immediately force Ukraine to make concessions in return for a potentially destabilising peace deal. Mark Rutte, the new Nato secretary-general and former Dutch prime minister, reminded Trump that the alliance helped ‘to advance US interests, multiply American power and keep Americans safe’.

Trump’s re-election will have a big impact on Germany’s embattled coalition under Chancellor Olaf Scholz. His win heaps more pressure on Germany’s troubled economy. Coalition parties meet on 6 November in Berlin to decide its fate. Left-wing members of the three-party grouping say Trump’s triumph makes it more necessary to continue the partnership, while the junior Free Democrat coalition partners lean in the opposite direction.

Wolfgang Ischinger, a former German ambassador to the US and UK, still an influential voice in European security matters, underlined European impotence by calling for Europe to ‘embrace’ Trump in an interview with the German daily Tagesspiegel. Emboldened by America’s strong economy and the stock market surge, Trump may emulate China by seeking to divide Europe through country-by-country trade accords rather than dealing with the European Union as a while. One senior European policy-maker was gloomy about what he called a ‘fracture’. He scotched the idea that Europe would pull itself together to confront the uncompromising future president: ‘Trump will clean up. It will be painful.’

Source:Mark Sobel

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A Win for Republicans Boosts US Stocks

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The 2024 U.S. Elections: Economic Implications

Tariffs & Taxes to Dominate the Post-Election Policy Outlook

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Conclusion: Some Uncertainty Removed, but Plenty Remains

Trump won, But so Did Seven Ballot Measures Protecting Abortion Rights

Abortion rights looked potent, but it will take time to get a clear sense of what happened

Source:Vox

Bitcoin Open Interest Tops Chart After Hitting $75K ‘Sweet Spot’

Bitcoin Open Interest reached $45.41 billion on Nov. 6. Source: CoinGlass

Analysts suggest Bitcoin has more room to grow

Source: CryptoQuant

Source: Cointelegraph

Donald Trump has Won — and American Democracy is Now in Grave Danger

Trump’s scary second-term agenda, explained

Democracy is not lost

Source:Vox

The US Election Aftermath for Central Banks

Federal Reserve

European Central Bank

Bank of England

Source:ING

Trump 2.0: a Surprisingly easy and Decisive Win

Impact on the dollar

Figure 1. Real trade-weighted dollar extremely strong

Source: Bank for International Settlements

‘Trump will clean up. It will be painful.’

Source:Mark Sobel

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