Tracking the “Trump Effect” Worldwide With Alternative Data

MacroXStudio
MacroXStudio

Key Takeaways 

  • As the world prepares for President Trump’s inauguration, MacroX’s tracks the effect on people, media, traders, and CEOs across the world 
  • For US citizens, the Overall Financial Anxiety – not captured in average economic numbers that are good – is high and close to 2008 crisis levels, and currently led by concerns about affording medical care and paying monthly bills. 
  • This rise of “how to afford my life” question may have played a role in this election and addressing it via tax cuts and/or Fed lowering rates will remain crucial to maintaining the political base.
  • The overall Trump effect around three major policy pillars – tariffs, immigration, and deficits hit a peak of interest and concern in late November and early December but has since declined with news media being most concerned, CEOs not as concerned yet as they were in 2016-2020, and top traders certainly concerned about Trump but much more worried about the Fed. 
  • Externally – Canada CEOs are the most worried about Tariffs even as the same issues of affordability and immigration rise more generally
  • Finally, much can be attributed to president Trump but the 30-50 bps increase in term premium – a part of the 100 bp 10Y sell-off from September might have more to do with recession is being priced out with robust growth and rising inflation concerns and less with Trump’s policy uncertainty
  • This will be an extremely “data-dependent” year with the “second moment” or uncertainty playing a large role in the markets and we think alternative data will be crucial for a nimble response.

Fig 1: Financial Anxiety – aka “How can I afford my life” remains elevated with medical and monthly bills the biggest drivers now vs. food in 2020 and housing in 2008. Addressing this anxiety via Tax cuts or increasing credit access via lower interest rates via the Fed is crucial to maintaining his base

Fig 2: News Media has been very concerned with the “Trump Portfolio” and we expect a major spike again post inauguration

Fig 3: CEOs are less worried about the “Trump Effect” vs. last time for now

Fig 4: Internationally, Canadian CEOs are the most worried about Tariffs 

Fig 5:  But top traders are not as worried about policy uncertainty as they are about the Fed mandates and the potential for inflation

Fig 6: As the odds of recession (inversely proportional to the 10Y-2Y slope) are lower, the 10y term premium seems to be normalizing. Thus the Trump effect is unlikely to explain all the move and that’s why the top traders are paying more attention to the Fed repricing.

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