How is the stock market reacting to yesterday’s attack on Trump?

We won’t know how stock markets in the United States will respond to this weekend’s attempted assassination of former US President Donald Trump until US markets open on Monday morning (overnight Aussie time).

We do know that the S&P/ASX 200 Index (ASX: XJO) has just roared into new all-time high record territory, currently up 0.6% at 8,006 points.

And we know that S&P 500 Index (SP: .INX) futures are up 0.2%, indicating a likely positive start to the week in US stock markets.

This comes after Trump, who’s running against incumbent President Joe Biden in hopes of retaking the White House in November’s presidential elections, survived a sniper attack at a campaign rally on Saturday (Sunday morning in Australia).

A bullet grazed the former president’s ear, and a spectator was tragically killed in the attack, with several others wounded before police eliminated the 20-year-old shooter.

While our most ardent hope is that this heinous attack marks an end to escalating political tensions and violence, our beat is the stock markets.

With that in mind, here’s what investors might expect in the wake of the failed assassination attempt on Donald Trump.

How the Trump shooting could impact stock markets

Biden’s popularity was already plunging amid concerns over the 81-year-old’s potentially deteriorating mental faculties following the recent presidential debate. Now, Trump’s literal dodging of a bullet and subsequent defiant public appearances are widely seen to have boosted Trump’s election chances.

So, what does that mean for the ASX and global stock markets?

According to Nick Twidale, chief market analyst at ATFX Global Markets (quoted by The Australian Financial Review), “Undoubtedly, there’ll be some protectionist or haven flows in the Asia early morning. I’d suspect gold could test all-time highs, we will see the yen getting bought and the dollar and flows into Treasuries too.”

To date, we haven’t seen any major moves in the gold price, with the yellow metal trading near its Friday levels of US$2,411 per ounce.

Cryptocurrencies are another story.

Kyle Rodda, senior financial market analyst at Capital.com, said (quoted by Bloomberg), “This news marks a changing point in American political norms. For markets, it means haven trades but more skewed towards non-traditional havens.”

Rodda said he had noted more client flows into Bitcoin (CRYPTO: BTC) and gold after the shooting. Indeed, the Bitcoin price is up 6.5% since the Trump campaign rally attack, currently at US$62,486.

Stock market volatility likely to spike

Investors should also prepare for more stock market volatility, said Frank Monkam, senior portfolio manager at Antimo.

According to Monkam:

Yesterday’s assassination attempt of President Trump is likely to mark the ‘grand opening’ of an elevated period of volatility for risk assets. Trump trades are also poised to move on the high conviction list for investors, with a particular focus on rates markets where the re-pricing of fiscal profligacy will look to offset the prospects of imminent Fed cuts.

With Trump favouring tariffs and looser fiscal policies, analysts are also forecasting a stronger greenback and weaker US Treasuries.

“The bond market should at some point, become aware of President Trump’s higher odds of winning the White House than any of his rivals. And I continue to believe that as his odds rise, so should the probability of a bond market riot,” Marko Papic, chief strategist at BCA Research, said.

Traditional energy companies could benefit as part of the so-called Trump trade while renewable energy companies could see their stock market prices come under pressure.

According to Michael Purves, CEO of Tallbacken Capital Advisors, there’s also the potential that ASX and US stock market investors could now see the US Fed opt to hold interest rates higher for longer.

“Trump’s stated policies are (at least now) more inflationary than Biden’s, and we think the Fed will want to accumulate as much dry power as possible,” Purves said.

Foolish takeaway

While I generally like to craft my own Foolish takeaway on the stock markets, I don’t think I could put it any better than Oliver Pursche, senior vice president at Wealthspire Advisors.

According to Pursche (quoted by Bloomberg):

Regardless of what may or may happen Monday morning [US time], not reacting may prove to be the smartest thing you can do as a stock investor because generally people overreact in the wrong direction.

Markets will find their equilibrium and get back to the things that matter from an investment perspective, which are economic growth, monetary and fiscal policy and corporate earnings.

The post How is the stock market reacting to yesterday’s attack on Trump? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.