Baker Market Update
2024-11-08

Donald Trump’s victory in the 2024 US Presidential election ripped through global markets on Wednesday, with US stock futures rallying, treasury yields jumping, and the dollar surging the most since 2022. S&P 500 futures climbed 2.3%, 10-year yields rose 15 basis points to a four-month high of 4.42%, and bitcoin spiked to a new record. Trump won the race to the White House after network projections showed he took the battleground states of Wisconsin, Pennsylvania, and Georgia, and Republicans gained control of the US Senate.

His election victory may herald a broad-based surge in tariffs in the global economy. He has stated he would raise tariffs to 60% on goods imported from China and 20% on the rest of the world. This would bring average US levies above 20%, a level not seen since the early 20th century. America’s closest partners, Mexico and Canada, would have the hardest hit. For most other countries, a relatively small shock to GDP would mask a big shift in trade flows away from the US. It is still uncertain how much will be enforced and how much is just a bargaining chip for Trump to extract concessions. For comparison, Trump’s first trade war with China lifted average US tariffs to 3% from 1.5%. The Smoot-Hawley Tarriff Act of 1930 boosted average rates to almost 20% from about 14%. The proposed increases would take the average rate to 20% and the proposed tariffs would profoundly transform US trade relationships with the rest of the world. Both US imports and exports would drop and China’s share in total US imports would fall to about 2% from 14% in 2023. Overall, good imports as a share of the US GDP would drop to only around 5% from more than 11% in 2023 – a ratio last seen in the earl 1970s.

In other news, applications for US unemployment benefits picked up last week, remaining near average pre-pandemic levels. Initial claims increased by 3,000 to 221,000 in the week ended on November 2nd. That was roughly in line with the median forecast in a Bloomberg survey of economists. Continuing claims, a proxy for the number of people receiving benefits, rose to 1.89 million in the previous week, the highest level since November 2021, according to the Labor Department data released on Thursday. The recent increase likely reflected lingering impacts from storms and strikes last month, as well as manufacturing job cuts.

Next week we see more information on CPI Index numbers, monthly budget statements, retail sales, and PPI numbers. For those who have Veterans Day off this Monday, enjoy your long weekends and thank you Veterans for your service to our country!