• Trump’s election doesn’t change the prospect of a 25-basis-point interest rate cut by the Fed tomorrow, but going forward the central bank “will need to remain vigilant,” AmeriVet’s Gregory Faranello writes. “The outcome of last night’s election only reinforces our view of gradualism, caution, little forward guidance, and an open mindset,” Faranello said.

The latest Market Talks covering U.S. politics. Published exclusively on Dow Jones Newswires throughout the day.

1625 ET – Australians have some reason to be concerned about a second Trump White House, says Shane Oliver, chief economist at AMP. Exports to the U.S. are only 4% of Australia’s total exports and may be spared from Trump’s tariffs as Australia has a trade deficit with the U.S. But, as an open economy with high trade exposure to China, Australia is vulnerable to an intensification of global trade wars under Trump, particularly if it weighs on demand for Chinese exports, he adds. An OECD study showed that Australia could suffer a 1.2% reduction in GDP as a result of a 10% reduction in global trade between major countries, Oliver says. There is also the risk that if Trump’s policies boost U.S. inflation there could be a global flow on, including Australia, resulting in higher than otherwise RBA interest rates, he adds.
(james.glynn@wsj.com; @JamesGlynnWSJ)

1616 ET – A second Trump White House is expected to see another ramp up in trade wars and further deglobalization, says Shane Oliver, chief economist at AMP. Trump is likely to target countries with a trade surplus with the U.S.
such as China, Europe and Japan, while rewriting the trade deal with Canada and Mexico, he says. The tariffs may not get as high as he has been talking about and it may be part of a “maximum pressure” campaign to bring production, including by Chinese manufacturers, back to the U.S, Oliver adds. Markets could go through a lot of disruption as Trump initially ramps up the pressure resulting in a much bigger impact on share markets than seen in 2018, where Trump’s trade wars contributed to an almost 20% fall in shares, Oliver says.
(james.glynn@wsj.com; @JamesGlynnWSJ)

1611 ET – There will be fewer checks and balances this time around in the Trump White House, says Shane Oliver, chief economist at AMP. Trump’s second term arguably faces less constraints than seen in his first term as: there are less anti-Trump Republicans in Congress and there is likely to be less “adults in the room” amongst his staff and advisers this time around, Oliver adds. Still, he is likely to regard the share market as a barometer of his success and would prefer to see it go up. So this may provide a partial constraint on him, he says. (james.glynn@wsj.com; @JamesGlynnWSJ)

1528 ET – The U.S. stock’s rally reflects investors’ relief that the election is over, with no major pushback, Kovitz Investment’s John Buckingham says. Stocks could remain hot for a while. “There is plenty of dry powder out there that could cause a rally,” he says. Buckingham adds that stocks tend to do well at this time of the year anyway. He says he isn’t doing any drastic changes in his portfolio, but is “assessing our financial stocks to see if we are going to trim some,” after the sector rallied today. He says Kovits has sold some assets recently and is looking to deploy the extra cash. (paulo.trevisani@wsj.com; @ptrevisani)

1523 ET – U.S. natural gas futures rise as commodity markets post mixed reactions to Trump’s election victory. “While views on the impact of a Trump presidency on the energy sector and natural gas vary widely, most agree that Trump’s campaign will likely bring deregulation and remove barriers to energy production, with a potential withdrawal from climate agreements and shifts in methane capture, pipeline permitting, and offshore drilling,” Gelber & Associates says in a note. But “natural gas markets may take time to show the impacts, as more immediate factors (such as the upcoming winter and its impact on storage) remain in focus.” The EIA’s weekly storage report is expected to show an above-average injection for last week, increasing the inventory surplus for a third consecutive week. The Nymex front month settles up 2.9% at $2.747/mmBtu. (anthony.harrup@wsj.com)

1509 ET – The Fed is likely to keep making its policy decisions based on available data while the new Trump administration takes shape, says Ninety One’s Archie Hart. Volatility is likely. “Markets will respond to [Trump’s] rhetoric,” Hart says. He expects Trump policies to have no meaningful impact on the economy until at least 2026. That means the outlook for interest rates in the near term shouldn’t change much, despite markets’ initial reaction. “We are only 12 hours into the new administration,” he says. (paulo.trevisani@wsj.com; @ptrevisani)

1506 ET – Oil recovers most of its early losses prompted by Trump’s election win with the market weighing a host of possible outcomes of a fossil fuel-friendly administration. Trump will be harder on Iran and the first thought in the market was that Iran won’t make a counter-strike against Israel, or that any strike would be less invasive, reducing the geopolitical premium, says Dennis Kissler of BOK Financial. But it could also lead to a loss of Iranian exports if Trump tightens sanctions, he adds. “The market’s going to get really erratic until we see what kind of policies you get.” The pullback was also due to Hurricane Rafael, he says, which is expected to reach U.S. Gulf waters by the weekend and shut in some production. WTI settles down 0.4% at $71.69 after hitting a low of $69.74 a barrel. Brent falls 0.8% to $74.92 a barrel. (anthony.harrup@wsj.com)

1503 ET – Fixed-income markets may be looking at a period of uncertainty as the newly elected Trump administration shapes up and policies are implemented that could have an impact on inflation and interest rates. “The question of whether Trump’s policies are capable of generating persistently higher inflation is one which we can debate for the next five years,” TS Lombard’s Freya Beamish writes. “In short, markets cannot fully price that story in today.” Treasury yields rallied on the election results, although they have lost steam in the past couple of hours. The 10-year yield is at 4.427%, down from 4.477% earlier today. (paulo.trevisani@wsj.com; @ptrevisani)

1448 ET – Front-month gold futures fall 2.7% to $2,667.60 an ounce on Donald Trump’s victory in the Presidential election. “The gold market had been pricing in a contested result so a clear victory removes an element of risk; hence the move the speed of which would have been exacerbated by algo’s,” says Rhona O’Connell of StoneX in a note. The $72.70 an ounce decline was the largest dollar drop in gold since June 2021. Gold has now fallen for two out of the last three trading sessions and has dropped 4.3% since the front-month contract hit a record-high of $2,788.50 an ounce on Oct. 30. (kirk.maltais@wsj.com)

1417 ET – Congress is not expected to enact cannabis legalization in the next two years now that Republicans have retaken the Senate, TD Cowen analyst Jaret Seiberg says in a research note. “Too many Republicans oppose recreational cannabis use for us to see leadership allowing a bill to move forward,” the analyst says. It is unclear which party will take control of the House, but the razor-thin margin there only adds more uncertainty, he says. It’s hard to see the House passing anything other than crucial legislation as it could take
as few as one defection to defeat a bill, Seiberg says. (dean.seal@wsj.com)

1353 ET – Trump’s election doesn’t change the prospect of a 25-basis-point interest rate cut by the Fed tomorrow, but going forward the central bank “will need to remain vigilant,” AmeriVet’s Gregory Faranello writes. “The outcome of last night’s election only reinforces our view of gradualism, caution, little forward guidance, and an open mindset,” Faranello said. In reaction to the election results, investors sell off Treasury bonds, sending yields higher. The 10-year yield is at 4.413% and the two-year at 4.262%. (paulo.trevisani@wsj.com; @ptrevisani)

1349 ET – Trump’s early agenda could focus on tariffs and a tougher immigration stance, says macro strategist Michael Medeiros of Wellington Management, because those are the areas where the White House will have the most room to maneuver without Congress. But Trump’s preference for high tariffs and an immigration crackdown both threaten to drag on growth in the near term, by shrinking trade and the labor force, Medeiros tells WSJ. If bond traders perceive bigger deficits ahead without growth to help foot the bill, a quick rise in bond yields could quickly register their discontent, Medeiros says. “Bond yields would act as the disciplinarian,” he says.
(matt.grossman@wsj.com; @mattgrossman)