By Naomi Rovnick, Dhara Ranasinghe and Nell Mackenzie
LONDON (Reuters) – November was a month of clear winners and losers from Donald Trump’s U.S. election victory on Nov. 5.
Trump’s trade moves, which essentially punished tariff-sensitive assets of European exporters into the Mexican peso and spurred investment toward U.S. stocks and the dollar, proved successful. Wall Street has recovered, the dollar is up 2% against rival major currencies and bitcoin has soared.
But December could be bumpy, with Trump trading vulnerable to a possible bond market reaction to the budget’s largesse, while tariffs could boost inflation and choke supply chains.
“Elevated stock valuations in the US reflect complacency as the more challenging environment we expect is not priced in,” BCA Research said.
Here are some of the assets in the spotlight.
1/ CURRENCY misery
The euro suffered its worst monthly decline since early 2022, down just over 3% to around $1.05, due to US rate risks, political unrest in Germany and France and a sharp regional economic downturn.
Analysts expect more volatility in the $7.5 trillion-a-day currency markets as the debate rages over how low the euro can go and whether Trump will really boost the U.S. economy while leaving most others to suffer.
The Mexican peso fell more than 1% against the dollar in November, while the pound sterling lost almost 2%. China’s offshore yuan is set to suffer its biggest monthly decline since August 2023, down nearly 2%.
The key question on currency markets, said Nick Rees, senior market analyst at Monex Europe, is: “Does Trump’s election victory portend a fundamental structural shift in the global economy, or are markets just mired in panic?”
2/ BITCOIN, BOOM OR BUST?
If there’s one asset that knocked it out of the park in November, it’s bitcoin.
The cryptocurrency has surged 37%, briefly hitting the $100,000 mark on hopes of a more crypto-friendly regulatory environment under Trump.
The last time bitcoin rose this much was February, when money flowed into new exchange-traded bitcoin products.
So, what’s next? For some in the industry, a rise to $100,000 would mean the niche asset is finally going mainstream.
“If bitcoin breaks through the $100,000 level… even more people could find crypto on their radar,” said AJ Bell investment analyst Dan Coatsworth.
Others believe there is a risk of speculative overload, meaning Bitcoin’s rise might as well be followed by a sharp decline that catches some investors off guard.
3/ TECH UNDER RATES
Wall Street’s tech-focused Nasdaq 100 posted its best monthly gain since June, when Trump ally Elon Musk’s Tesla soared 33% and AI zealot Nvidia boosted even as the chipmaker forecast slower sales growth.
Risks for technology are increasing as Trump’s pricing plans threaten supply chains and AI spending by so-called hyperscalers such as Microsoft, Meta and Amazon is raising fear among investors.
“There is an intense arms race between the main hyperscalers, which could lead to overinvestment,” said Mikhail Zherev, manager of Amati Global Investors’ innovation fund. “We have reduced our exposure (to AI).”
The European Central Bank last week warned of “negative global spillovers” if an AI “bubble” bursts and the tech stocks that dominate global stock markets collapse.
4/ BANK RUN
Investors liked big American banks but hated European banks.
An index of US bank stocks rose 13% in November, the best month in a year, driven by hopes for deregulation under Trump.
But European bank stocks fell 5% as a weakening economy fueled interest rate cuts. Still, they’re up 16% so far this year, thanks to relatively higher interest rates.
European banks remain net sold by hedge funds “despite good performance,” according to a prime brokerage note from JPMorgan to clients seen by Reuters on Wednesday.
The industry must respond and ramp up commission activities in wealth and asset management, dealmaking and investment banking, according to a Deutsche Bank report.
5/ BONDBUDDIES NO MORE
November could be the month when the major bond markets (which typically move together) parted ways.
Although the yield on US 10-year government bonds at the end of November changed little this month, the direction matters and it points higher.
U.S. borrowing costs have risen 60 basis points since mid-September on strong data and expectations for higher inflation and budget deficits under Trump’s administration.
Capital Economics expects government bond yields to rise by the end of the year from around 4.24% to 4.5% now.
In contrast, German 10-year yields fell by more than 20 basis points to around 2.15%, marking the biggest monthly decline of 2024, due to weakening economic activity, Trump’s tariff threats and the escalation between Russia and Ukraine.
It’s a different story in Japan, where yields are set for their biggest monthly rise since May, partly as a fall in the yen after Trump’s victory fuels speculation about a rate hike next month.
(Reporting by Naomi Rovnick, Dhara Ranasinghe and Nell Mackenzie; Editing by Kim Coghill)
