‘Déjà Vu’ Jolts Traders Across Markets on Trump Tariff Redux
(Bloomberg) -- Nick Twidale spilled a flat white coffee on his keyboard when headlines on Donald Trump‘s latest tariff threats caused his phone to blow up with calls.
Most Read from Bloomberg
New York City’s ‘Living Breakwaters’ Brace for Stormier Seas
In Kansas City, a First-Ever Stadium Designed for Women’s Sports Takes the Field
NYC's Underground Steam System May Be Key to a Greener Future
NYC Gets Historic Push for 80,000 Homes With $5 Billion Pledge
“It’s bad déjà vu with social media posts all over again, but muscle memory is kicking in,” said the 26-year currency trading veteran at AT Global Markets, after the social media posts by Trump on Monday in New York sent the dollar soaring. “The good thing is there’s plenty of opportunity to make money here for the next four years under Trump,” said Twidale, who managed to profit from short Mexican peso and Australian dollar bets despite the spillage.
That’s increasingly the hope of traders preparing for Trump’s return — and the market volatility that will come with it.
Subscribe to the Bloomberg Daybreak podcast on Apple, Spotify or anywhere you listen.
Investors were given a taste of that volatility after the president-elect took to social media site Truth Social and pledged more tariffs on China, Mexico and Canada, his first specific threats to curb global trade flows since he won the Nov. 5 election.
Trump’s vow to impose 25% duties on products from Mexico and Canada helped push the nations’ currencies more than 1% lower against the greenback, amplifying swings in the $7.5-trillion-a-day foreign-exchange market. The offshore yuan fell against the dollar, part of a widespread decline in emerging market currencies.
In New York, traders and analysts rushed to their computers after the news hit. Among them was Erick Martinez Magana, a strategist at Barclays Plc, who has been recommending that clients consider long dollar-short Mexican peso positions.
“Trump was serious regarding changes in immigration and tariff policies, with Mexico a direct target,” said Magana. He expects the peso to weaken further toward 21.50 per US dollar. It was trading around 20.60 on Tuesday.
Asian stocks also came under pressure as traders digested the news, with export-related companies such as electronics and machinery particularly hard hit.
What Bloomberg Strategists Say...
“Even if initial fears fade, and markets take back some of the initial currency declines in the wake of Tuesday’s moves, the lingering risk for fresh headline hits will keep volatility elevated.“
Mary Nicola, Markets Live strategist
Trading markets is like running a steeplechase, but under a Trump presidency it’s like doing it “under mortar fire,” said Calvin Yeoh, who helps manage the Merlion Fund at Blue Edge Advisors. “It’s hard enough even with direction in hand, but you don’t see the real trouble coming.”
Among his strategies? Picking a direction and then “selling volatility post-headlines,” said the hedge fund manager in Singapore.
‘Good Environment’
The wild swings following Trump’s posts on Truth Social were a reminder of how much volatility his comments can cause, and how far it can spread. Trump’s all-hours social media posts during his first term sometimes triggered sudden market swings, upending the work and sleep schedules of investors across the globe.
The jump in the dollar on Tuesday came just a day after the greenback fell against a variety of currencies, as traders reacted to the news that Trump had picked Wall Street veteran Scott Bessent as Treasury Secretary. Bessent has stressed a gradual approach to tariffs, and some traders thought he would be a calming influence on the president-elect.
“It’s typical Trump, isn’t it?” said Shawn Oh, an equities trader at NH Investment & Securities Ltd in Seoul. “At least having someone like Bessent as Treasury Secretary is a relief. I think people would expect Trump to be tamer than the first time but still there will be a lot of posturing.”
Tsutomu Soma, a 39-year trading veteran based in Tokyo, is among those bracing for more market jolts from Trump’s return.
“It’s a good environment to trade,” said Soma, a bond and currency trader at Monex Inc. “Headlines will be very important in a Trump Presidency — there will be a lot of speculation and conflicting ideas for trades.”
More than 3,000 miles away in Singapore, Manish Bhargava is taking what is likely to be a popular step for traders across the world over the coming months: signing up to Truth Social, allowing him to keep a closer eye on Trump’s social media posts.
“Monitoring his posts closely will be essential,” said the chief executive officer at Straits Investment Management. “Given Trump’s history of using social media to communicate his unfiltered thoughts and policy intentions, we can anticipate a similar pattern moving forward.”
--With assistance from Mia Glass and Sangmi Cha.
(Added quote and additional context on Treasury Secretary pick, updated prices)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.