Bitcoin the Big Winner, USD and Stocks Surge on Trump Victory

Bitcoin, USD, S&P 500 Talking Points:

• A Trump win has been factored in via prediction markets for almost a full month but the reaction in markets has been massive across Bitcoin, gold, stocks and the US Dollar.
• The week isn’t over yet with an FOMC rate decision tomorrow, and the bank is widely expected to cut rates again. The bigger question is whether the bank continues cutting rates through the end of next year and the last time that Trump won with a Republican supermajority, the Fed, then led by Janet Yellen before being replaced by Jerome Powell, went on a hawkish campaign that saw them over-hike to the point that they had to cut three times in 2019.
• I looked into these scenarios in yesterday’s webinar and with the exception of gold, much has played out as I was expecting in a Trump win scenario. The US Dollar has posed a massive move off of a key support level to trade at fresh three-month highs.

Video

Bitcoin is the big winner of the night on the back of Donald Trump’s victory. Election results are still being tallied for the House of Representatives and this could have a massive impact on outcome as a Republican supermajority could make it much easier for the incoming President to drive his economic agenda. But, the notably crypto-friendly candidate and former President has helped BTC/USD to hit a fresh all-time-high with the first ever test of the 75k level which, at this point, has held the highs.

The response to that resistance has so far led into higher-lows and this keeps the door open for bullish breakout potential. Confirmation of a Republican win in the House could be the driver that pushes it back over the ledge but until 75k is taken out and buyers show bids above that handle, it should be treated as resistance.

BTC/USD Hourly Price Chart

Notably gold has been beaten down since results have come in. And this flies in the face of the prior 2024 trend and at this point, I’m assuming this is a war bid being priced-out on the back of Trump’s victory. I had previously said that I didn’t want to get too bearish on gold given how well it had held up this year, even as overbought conditions continued to show on the monthly chart since April. Well – this is the type of price action that can change that.

It's still early as we’re only a day in to results so caution still of order, but with clear favor being shown to Bitcoin as an anti-fiat vehicle that could further erode gold’s attractiveness.

As always, price action is what’s most important so if sellers come in to defend 2685 or 2700, then we could have the early makings of bearish trend potential.

Gold AD

Gold Hourly Price Chart

Stocks

In the weekend forecast I looked at S&P 500 futures holding a massive spot of support, which extends a theme that had been in-play for a few weeks prior.

That support at 5733 held the lows again on Monday and Tuesday, leading into a massive rally overnight as news of Trump’s win was priced-in through markets. At this point, the S&P 500 has finally put in a breakout above 5900 and bulls have shown a support response when that price came into play earlier this morning on a pullback. That keeps buyers in control and the next major level overhead is a big one, with the 6k psychological level. I’d expect that to slow the advance for at least a little while, but I’d still be hard pressed to get too bearish here given how aggressive this move has priced-in.

Longer-term, I remain bullish on equities. And as I wrote in the Q4 Forecast like the four forecasts before that, I see little reason to shift stance.

Indices forecast

S&P 500 Futures Hourly Price Chart

The US Dollar, FX Majors

Going along with that US-heavy rally, the US Dollar has broken out to fresh three-month highs. And this bears some resemblance to Trump’s last win in 2016, when the initial move that night was USD-weakness as Clinton was expected to win but that hurriedly changed to strength as Trump tallied more and more electoral votes.

At that point, Trump also had a supermajority with Republicans taking both houses of Congress. This was key – as control of both houses of Congress and the Presidency allowed Trump to push his economic agenda. In response, Janet Yellen, then Fed chair, began to talk up the necessity of buffering the expected fiscal stimulus with tighter monetary conditions.

It was less than a month after Trump’s election in 2016 that the Fed hiked for only a second time since the Financial Collapse. And then in 2017, the bank hiked three times. And then in 2018, four times. The Fed hiked so much that in 2019, they had to pare that back with three rate cuts, which had rates already low when Covid hit in 2019.

Interestingly, the USD strength that showed on the back of Trump’s win only lasted for about a month, with the currency topping in December of 2016 and then selling off for most of 2017. Along the way stock prices jumped-higher even as the Fed was hiking rates.

So, in the US Dollar the question remains as to whether USD-strength will be able to continue to drive through the rest of this year and into next year, as the Fed is still currently expected to continue cutting rates.

As I said in the above video, I doubt that both USD and equities will be able to continue strong bullish trends through next year’s trade; I expect them to diverge at some point. And given the fact that USD has been in a range for almost two full years, I expect that the Dollar would be the asset class to retreat.

I was talking about the USD range when at support in September and until that breaks or gives me reason to change, I’ll continue to look at the matter from that lens. And the USD is now pushing up towards longer-term resistance with major waypoints at 106.50 and 107.00.

If we do see USD weakness come back at some point, I still like that theme against the Canadian Dollar with a longer-term range still in-play there, and the pair is nearing its first re-test of the 1.4000 handle in more than four years.

US Dollar Weekly Price Chart

--- written by James Stanley, Senior Strategist