The Shot
Macro D Thought Piece
Below is a thought piece from my friend and Paper Alfa contributor Macro D, who is dissecting this weekend’s events. For me, I stay out of opining too much. Trump “trades” are being pushed everywhere, but I urge caution. As much as the outcome, for now, is pro-Trump, it wasn’t really anti-Biden, who can calmly put people’s worries about his presidential fitness on the back burner. We were literally 2 inches away from a very unknown place. So, proclaiming a victory feels too premature for me. Besides, Trump trades are not all clear cut. Fiscal spending? Check, but we are already there. Tariffs and pro-US policies to foster growth, check. This is as much about narrative and emotions as it is about economics. A lot can change. So be mindful of that.
Let’s now see what Macro D’s thoughts are on those events.
by Macro D
It didn't take an attack (which we would have all gladly done without) to understand that the man (Donald Trump) had an uncommon talent for moving through the bowels of life with the opportunistic sagacity typical of someone who can transform stone into gold and the risk of defeat into the antechamber of victory. The trickle of blood ran across half of his face. He raised his closed fist and shouted to the crowd, "Fight! Fight!".
Trump was hit in the ear and got up with the right side of his face bloody. The bullet pierced the upper part of his right ear, and this means that if Trump had not turned his face to the right, then the bullet would have hit the skull, penetrating from the area of the right ear. A dynamic that recalls the blow that John F Kennedy struck on November 22, 1963.
This man is an extraordinary chameleon. The scent of death had almost surrounded him, and he found the strength to condense his breath, fear, and ambition into a single thought: MY WILL IS TO WIN.
The Republican presidential candidate, for the umpteenth time, has managed to manipulate the collective imagination, and now?
What will be the consequences of the election campaign? One thing is sure:
The showman and popular leader is more alive than ever.
Trump's bloody face is part of a tradition that sees the most brutal violence accompany the hottest phases of the American dream. From the assassination of Abraham to the assassination of Bobby Kennedy, without forgetting the attack on Ronald Reagan (March 30, 1981) and the attacks on Theodore Roosevelt (October 14, 1912) and Gerald Ford (September 5, 1975).
History teaches us that when you shoot the presidential candidate, Americans unite; it is the effect known as "rally 'round the flag". Just remember the 1981 attack on Ronald Reagan, who obtained re-election with an overwhelming majority.
And now, what will Biden do? Now that the narrative is focused on his alleged senile dementia, will he be able to recover ground by presenting himself as the patriotic father that the United States needs?
Will Trump and the Republicans succeed in the project of teaching in the minds of Americans that the blame for this attack is to be found in the behaviour of the Democrats, who continuously demonize Trump's actions/words?
Let's get to the point. In the first session on Wall Street, after the attack on Donald Trump, the direction of US Treasury bonds tips the scales towards the victory of the Republican candidate. The 10-year Treasury note showed a yield increase from 4.186% to 4.244% in early trading on Monday, July 15, while the S&P 500 futures pointed to a 0.41% rise. Gold, the most typical safe-haven asset, recorded a slight decline to $2,417.60 an ounce - a level that remains historically high and not far from the record of $2,454.20.
Investors already considered a Trump victory the most likely scenario before the attack on Saturday, July 13. We must keep sight of what happened before the attack. After President Joe Biden's disastrous performance in the debate last month, Wall Street considered a Trump victory in November more likely, and bond yields jumped on expectations that the tax cuts passed in his first term would be extended and would increase the deficit. However, yields have fallen in the last week following new inflation data that has given the Federal Reserve more room to manoeuvre.
What happens now? I think the date to keep in mind shortly is the one that will coincide with the Democratic convention: August 19-22.
Then, the chickens will come home to roost, and there is a risk that, at that point, it will be too late for anyone interested (or not interested in doing so) to take any steps back.
I believe that the majority of Democrats want to reach that date with a presidential candidate other than Biden, but at the same time, I believe that the attack on Trump has strengthened the position of the current President.
However, I believe that we are about to enter an area of absolute risk, and given this, I would organize myself in time to respond in kind to the scenario that a vigorous and violent correction of the markets would cause.
I expect a sharp decline in the US dollar and a consequent and significant correction of the USD/YEN exchange rate towards the 145-140 area.
Volatility is upon us, and Trump is closer to the finish line than his opponent (who is still deciding whether to remain in the saddle of his candidacy).
A curiosity: Trump is ahead both nationally and in the swing states, and among these, there is also Pennsylvania, the state in which they attempted to kill him. It could be a sign of destiny.