Macro Mondays | Markets React to Trump | 11|11|24

World of Oil Derivatives

This week, market volatility took centre stage, spurred by the perceived inflationary policies under Trump. His election victory led to a steepening yield curve, with 10-year yields surging nearly 19 basis points, and market-based inflation expectations—like 5-year breakevens—also jumped significantly. Equities responded optimistically, with the S&P 500 up 3.3% and the Nasdaq climbing 4.5%, buoyed by hopes of deregulation.

The energy sector’s reaction was mixed; Trump's past policies affecting Iranian exports could signal a return to stricter measures. Renewable energy stocks, however, faced setbacks, with Sunrun notably impacted. Meanwhile, the Federal Reserve cut rates by 25 basis points, with Chair Powell hinted at a potential slowdown in further cuts, even as employment remains central to future decisions.

Internationally, the Bank of England reduced its base rate, and euro yields tumbled, driven by safe-haven demand and inflation risks. Simultaneously, China showed signs of economic recovery, with a surprising export surge and positive PMI data. Additionally, Beijing announced a substantial 10 trillion-yuan debt refinancing package, but the measures fell short on the consumer measures markets had hoped for.

James and Will unpack how these global financial shifts impact investors and the broader economic landscape.