Inline inflation data cooled the hawkish sentiment driving through equity and Treasury markets. Equities erased their losses for 2025, with the S&P 500 up about 2% in its biggest gain since the aftermath of the US election. A surge in Treasuries pushed 10yr yields down by almost 15 basis points — easing fears that a 5% rate would be on the horizon.
Treasuries also rose on Thursday as Waller told CNBC that officials could lower rates again in H1 if inflation data remained favourable. He also wouldn’t entirely rule out a cut in March. Swap trading implied a little bit more easing this year, with July looking like the first cut.
Bessent had his hearing for Treasury Secretary last week. In his comments, he stressed that maintaining the greenback as the world’s reserve currency is critical. When asked about any inflationary impact of President-elect Donald Trump’s economic plans, Bessent said he believed the policies would bring inflation closer to the Fed’s target. He also indicated support for expanded sanctions on Russian oil companies and blasted China for attempting to export its way out of a deep domestic economic slump.
A string of bank earnings started earnings season with positive reports across the board. We expect a boom in America’s biggest banks this year.
The Week Ahead
Currency and bond investors will be eagerly awaiting the inauguration of President-elect Donald Trump on Monday for cues on the direction of U.S. policy, with executive orders potentially spelling big moves for markets.
Trump’s inauguration will mark a highlight in an otherwise relatively quiet week for data. In Europe, the focus will be on provisional purchasing managers’ surveys for January, while in Asia, an interest-rate decision is due from the Bank of Japan.
Eyes will also be on the World Economic Forum in Davos, Switzerland.
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Inauguration
With the inauguration being the key event of the week, we start our ideas here as a slight precursor to a larger article coming on Wednesday. We don’t feel any large market moves are coming in the days ahead but rather continued sentiment around some key Trump themes. Of course, there is no knowing what he might say and signal to the markets, so we will be waiting for any shocking developments.
We expect his general stance to confirm the follow-through on the actions that validate the following trades.
Long Crypto
Trump has positioned himself as the first crypto President, and some recent actions have made this clear. Last Friday, he released his own meme coin, which has quickly gathered a market capitalisation of $70bn (at the time of writing on Sunday). We can’t help but think, “How did we get here?” and “What on earth are we in for over the next four years?”
We’ve added some more BTC (at around $104K) on top of a core holding that we have. With equity markets being closed for MLK day, Bitcoin will capture the euphoria on Monday if we build off last week’s action.
We expect a move higher on Monday, potentially to a new high, before an eventual quick move lower. Buy the rumour, sell the news type of play. When the unwind will come is hard to say. We’ll have a stop in place and will move up with any move higher.
Long Dollar
Continued dollar strength looks likely following the inauguration. Although some gains were pared last week following announcements of gradual tariffs, commentary from Donald Trump regarding these policies could further drive gains this week. With him in office, we will start to get more specific details. Whether it is the art of the deal for negotiation leverage or serious implementation, we will have to see.
For now, we’re trading this expression through a long USD/CAD. Canada tariffs are a concern for the local currency, so this pair taps into both angles.
TRADE IDEA: LONG USD/CAD
Entry: 1.448
Stop Loss: 1.441
Take Profit: 1.462
Long Trump Trade Basket