(Bloomberg) — Traders will initially rush into haven assets and reevaluate trades most tied to former President Donald Trump’s candidacy after he was shot at a rally, market watchers said.
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“There will undoubtedly be some protectionist or haven flows in Asia early in the morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I would suspect gold could test all-time highs, we’ll see the yen buy and the dollar and flows into bonds as well.”
But early market commentary suggests the firings will boost Trump’s chances of winning the election, which will shift focus to securities more exposed to his policies and may ultimately be negative for bonds.
Assets linked to the so-called Trump trade range from the dollar to bonds to stocks of private prisons, credit card companies and health insurance companies. Investors see Republican policies on tariffs, immigration and deficits leading to a stronger dollar, higher bond yields and a more favorable environment for these equity sectors.
Traders will also closely monitor market measures of expected volatility on Monday, such as those for the tariff-sensitive Chinese yuan, which had begun to price in on the US vote.
Trump said he was shot in the right ear after gunfire erupted at his political rally in Butler, Pennsylvania. His campaign said in a statement that he was “fine” after the incident, which saw him storm off the stage. One of those attending the rally was shot and killed, while the assailant was killed by US intelligence.
Strategists were already expecting a volatile run in the November election, largely because Democrats are still jockeying for the nomination for President Joe Biden after his debate performance last month. Investors also grappled with the possibility that the election could end in prolonged conflict or political violence.
But there is little precedent for events like Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and yields on the 10-year note fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay close attention as the attack is likely to boost Trump’s election chances, according to Marko Papic, chief strategist at BCA Research Inc.
“I think the bond market will have to realize at some point that President Trump has a better chance of winning the White House than any of his opponents,” Papich wrote. “And I continue to think that as the chances of that increase, so will the chances of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold after the shooting. The cryptocurrency advanced after the news broke.
“This news marks a turning point in American political norms and the urgent need for greater political violence,” he said. “For the markets, it means haven trades, but more skewed towards non-traditional havens.”
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