(Bloomberg) — Traders will initially rush to safe-haven assets and reassess trades most closely tied to former President Donald Trump’s candidacy after he was shot at a rally, market watchers said.
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“There is no doubt some protectionist or safe haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I expect gold to test all-time highs, we will see yen and dollar buying, and Treasuries flows as well.”
However, early market commentary suggests the shooting will boost Trump’s chances of winning the election, which will shift focus to securities most exposed to his policies and could ultimately be negative for Treasuries.
The assets tied to the so-called Trump trade range from the dollar to Treasury bonds to shares of private prisons, credit card companies and health insurance companies. Investors see Republican policies on tariffs, immigration and the deficit as leading to a stronger dollar, higher bond yields and a more favorable environment for these financial sectors.
Traders will also be closely watching market gauges of expected volatility on Monday, such as those for the tariff-sensitive Chinese yuan, which has begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at a political rally in Butler, Pennsylvania. His campaign said in a statement that he was “fine” after the incident that led to him being removed from the stage. One rally attendee was shot and died, and the shooter was killed by the U.S. Secret Service.
Strategists had already forecast a volatile path to the November election, in part because Democrats were still reeling from President Joe Biden’s candidacy after his debate performance last month. Investors were also grappling with the possibility that the election could end in a protracted dispute or political violence.
But there is little precedent for events like Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1%, and the yield on the benchmark 10-year Treasury note fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay special attention because the attack is likely to boost Trump’s election chances, said Marko Babic, chief strategist at California-based BCA Research Inc.
“I think the bond market has to realize at some point that the odds of President Trump winning the White House are higher than any of his rivals,” Babic wrote. “And I still think that as the odds of him winning rise, the odds of a bond market riot should rise.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he saw clients flock to bitcoin and gold after the shooting. The cryptocurrency’s value surged after the news broke.
“This news represents a turning point in US political norms and the risk of greater political violence. For markets, it means safe haven trading but more skewed towards non-traditional safe havens,” he said.
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