Crypto, gold, prisons and gun stocks: more on the Trump trade
Plus, crypto captives; Rothbardian vibes; and a Sahm rule update
Events over the last week have given us a preview of the post-election Trump trade. The early winners from Trump’s improved election prospects were gold, crypto, gun and prison stocks. If that sounds dystopian, it should be recalled that this occurred against the backdrop of a more aggressive pricing of prospective Fed easings, which probably did more to underpin equities and other ‘risk-on’ trades. A market commentator in the linked FT story is quoted as saying ‘A presidential candidate surviving an assassination attempt is good news in itself,’ which is true enough as far as the ‘surviving’ bit goes, but kind of glosses over the ‘attempted assassination’ part.
There is a market consensus that a second Trump administration will be more inflationary, but the steepening in the yield curve suggests that markets think this is more of a problem for ‘future me’ rather than a near-term concern for the Fed. Recession probabilities based on vanilla term spread models have moderated in line with the curve steepening, underpinning the ‘risk-on’ trade. Bank stocks have done well given a steeper curve supports margins in borrowing short and lending long.
