The market may feel it has further room to bounce back as the worst fears were not realised on tariffs on Donald Trump’s highly touted day one, Saxo Chief Macro Strategist John J. Hardy says.
“But the setup keeps many areas open for significant headline risks,” he says.
Commenting following Trump’s inauguration as US President overnight (AEDT), Saxo’s Chief Macro Strategist J says the 47th President delivered a “muscular” inauguration address that marks out a confrontational policy – both domestically and internationally.
However, Hardy notes there were a few immediate measures the market can grab onto for a sustained reaction until further details are known.
“The market may feel it has some further room to bounce back as the worst fears were not realised on tariffs … but the setup keeps many areas open for significant headline risks – much of (Trump’s) domestic agenda was along the lines of grievance for his treatment by a politicised Department of Justice and cultural issues that won’t interest the markets much,” Hardy (inset) says.
“But he pointed to a few well flagged issues like an intention to ending the Green New Deal and EV mandates, the creation of a Department of Government Efficiency, and encouraging more domestic energy production.”
Details on tariffs have not been forthcoming and market action today saw the US dollar sold off and risk appetite rebound elsewhere in the world as Trump focused on directing federal agencies to study trade policies and evaluate the trade relationships with China, Canada and Mexico.
Trump indicated his administration will focus on reducing trade deficits, unfair trade practices, and singled out the 2020 trade deal with China and the country’s lack of compliance with that deal.
“The USMCA that replaced the original US-Canada-Mexico NAFTA trade deal is up for review in 2026. This could yet prove fertile ground for trade war risks down the road – headline risk to continue there in other words,” Saxo’s Hardy says.
Meanwhile, US equity and bond markets were closed for a US national holiday. But as Hardy notes, the currency market slightly unwound a portion of the USD weakening that unfolded “as Trump still intoned rather seriously on tariffs and has set up the country for some kind of showdown with China on the lack of compliance with the prior trade deal from 2020 and possibly over the Panama Canal”.
Hardy says much of Trump’s domestic agenda announced today was along the lines of grievance for his treatment by a politicised Department of Justice and cultural issues that will not interest the markets much.
“All in all, no huge surprises in this inaugural address from Trump – but the intentions are very clear and have enormous implications. From here, the keys will be in the scale and implementation of these policies both domestic and foreign, what shape the tariffs eventually take and how the world reacts. The US isn’t the only country with leverage,” he adds.
Write to Adam Orlando at Mining.com.au
Images: Unsplash & Saxo
