The fog is lifting. One week after inaugurating a new president some financial market clarity is starting to emerge. Still foggy but clarity takes time and a bit of speculative anticipation. One thing for certain, things are changing and quickly.
It is fast becoming obvious that financial markets ran up sharply in anticipation of the new administration. The “Golden Age of America” may very well be on its way, but there will be “hiccups” as the journey unfolds. That’s not a total bad thing, just an overdue thing.
The first thing that is becoming clear is that inflation is still a problem which is keeping interest rates higher then previously anticipated AND now catching “the ire” of President Trump. Lifting regulations on generally everything in the U.S. should stimulate economic growth. Using tariffs to encourage employment here in the U.S will certainly have an inflationary effect. It would seem those programs would not be conducive to the Fed lowering interest rates, at least not anytime soon.
So as the fog lifts it’s exposing a “rift,” “a clashing of the minds” or fight between the President and the Chairman of the Fed. That could get nasty and bitter.
Peering through the fog it looks like some additional clarity is coming to the crypto sector. The “evil” former SEC Chair Gary Gensler has left the office. Very friendly crypto regulation is being drafted. The prospect of a U.S. sovereign wealth fund (or reserve holdings) that include bitcoin is looking promising. Wyoming Senator Cynthia Lummis has introduced a bill, “The Bitcoin Act of 2024,” that would call for a reserve fund AND a provision to sell the U.S. gold holdings with the proceeds invested in bitcoin.
That may not be totally clear through the fog, but the odds of such legislation passing congress looks promising. Certainly not on day one (or any time soon) but its becoming clear it may happen. Should the U.S. decide to replace gold with bitcoin as a store of value, the ripple effect around the globe would be substantial and assert America’s leadership in digital assets.
On another note, one of the goals of President Trump is to get oil prices down. Fast. The fog on that has turned to light clouds, easy to see through. Lower oil prices usually means lower inflation. And it is a very safe bet that there should there be an end (somehow) to the Ukraine/Russia war, and part of the deal will be the lifting of sanctions on Russian oil sales. That, coupled with increased U.S. production, could easily cause oil to trade much lower.
Certainly as the fog lifts and some clarity emerges in some sectors, other fog banks pop up on a daily basis. “The Golden Age of America” is a work in progress and financial markets would be wise to be very patient.
