Well, Mr. Trump’s show begins, he won the elections and the North American stock market and the dollar celebrate it. As in his first election in 2016, financial markets like the talk of tax cuts, deregulation and more economic freedom. We believe that its victory can be a strong boost to the North American market. Small North American companies more closely linked to the domestic market have seen strong increases; the Russell 2000 index has once again reached new all-time highs. The lights…and the shadows?…the face b It is once again the entire tariff threat, without having taken office it has already announced tariffs on Mexico, Canada and China. Europe awaits its turn, more defense spending by Europe is a historic demand from Mr. Trump, in an increasingly impoverished Europe with high debt levels, tariffs can be an additional finishing touch. We see how Germany is languishing at an industrial level and France, after many years of unsuccessfully trying to rationalize its public spending, is entering a political crisis and at this moment its risk premium is above that of Spain and at the level of Greece, “Welcome to the périphérie.” The acronym PIGS should be updated to FIGS, in honor of our Portuguese friends who have done such a good job.
We continue with the “b-side”, In our flash note after the election result we commented that Mr. Trump’s biggest challenge is to maintain the yield curve, if the 10-year US Treasury were to go above 5% it could derail this euphoria, in the end as we mentioned in the previous monthly comment “It is the economy stupid”the economy is what maintains and topples administrations. The future appointment of Scott Bessent As Secretary of the Treasury, he has greatly reassured the markets as he is a profile from wall street, supporter of debt control and spurring economic growth, we will see if it is successful.
We cannot finish without remembering the BRICS countries, it seems that they are not as immune as they have wanted to sell us, the Russian ruble is collapsing as is the Brazilian real, China is beginning to show signs of not knowing what to do to relaunch its economy. Its famous BRICS currency supported by Gold that was going to sweep away the USD, we see its implementation as very difficult and its long-term maintenance as impossible, we just have to look at history since ancient times with the multiple gold patterns that have existed and that have died.
We live in an interconnected world and one economic area is not immune to the rest, Mr. Trump has entered making a lot of noise and that is going to generate a lot of movement. Consequences: US dollar and stock market as safe haven assets, in Europe a white swan would be the end of the conflict in Ukraine, we will see if it is true that Mr. Trump has the formula to resolve it in 24 hours…hopefully.
It seems that 2025 is going to be very interesting on an economic and political level, fasten your seatbelts.