Top of the Morning: POTUS 47 - The next 100 days
At a Glance
The desk's thesis hinges on the significant fluctuations within the US political landscape and how these will reverberate through the markets in the coming quarters. Per the full note from UBS, President Trump's declining approval ratings, which have inverted from initial highs above 50% to current levels below, underscore shifting voter sentiment that may impact upcoming fiscal and monetary policies. Recent polling from sources including Nate Silver and RealClearPolitics highlight this trend, indicating broader implications for economic growth and market confidence. With no immediate high-impact events on the calendar, traders may look for sentiment cues in upcoming economic reports to gauge potential market reactions.
Key Takeaways
- 01Trump's second term approval ratings have seen a significant decline, which may impact market confidence.
- 02Increased volatility is expected as political uncertainty continues to grow.
- 03Consensus target for USD's performance is set at 1.075, with notable divergence among major firms.
- 04Upcoming economic reports will be critical in shaping market responses.
Full Analysis
What the desk is arguing
The desk is concerned about the potential for increased volatility in response to political changes, particularly as President Trump's second term faces notably lower approval ratings compared to his first. The implications of this sentiment could mean restrictive policies in fiscal measures and adjustments in market expectations regarding economic recovery. As per Kurt Reiman of UBS, the current media narratives may further influence market stability as the opposition builds in Congress.
Additional context comes from the polling data where disapproval is on the rise, suggesting increased challenges for the administration in implementing its policy priorities. The impact on investor sentiment could be profound, particularly if continued downward trends are observed in key economic indicators.
Where it sits in our coverage
Our current consensus target for the USD appreciation against a basket of currencies is pegged at 1.075, with a range between 1.04 and 1.12. This range is corroborated by projections from various firms, including: - JPMorgan: 1.10 (Mar-26) - BofA: 1.04 (Mar-26)
The desk's view aligns closely with jpmorgan's stance, as we are situated towards the upper end of this expected range, reflecting broader confidence in a stabilized USD despite the political backdrop. We note bofa, positioned at the lower end, diverges notably from this perspective, indicating a more cautious outlook.
How other firms see it
JPMorgan and other firms projecting a bullish dollar are allied under the premise that underlying economic fundamentals remain strong. Conversely, bofa provides a stark contrast, leaning toward bearish sentiments based on potential political disruptions.
Crucially, monitor the USD/EUR transition, as any adverse shifts in sentiment may reverberate through to the Fed's policy framework, especially given how pivotal the Federal Reserve's forthcoming communications could be in shaping overall market resilience. The USD/JPY pair also warrants close scrutiny in light of these developments.
Market Implications
Traders should remain vigilant of any shifts around the 1.075 level for the USD, as sentiment tied to political developments could lead to volatility. Upcoming economic indicators will be crucial to watch for potential trend confirmation or reversal.
From the original
The first 100 days marker of President Trump’s second term has been reached - Kurt Reiman, Head of Fixed Income Americas (UBS CIO), reflects on the administration’s policy priorities and impacts they have had to the US economy, markets, and investment return. We then shift focus
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The desk interprets recent political turbulence in the U.S. as a pivotal moment for market sentiment, particularly among domestic and international investors. Per the full note [source], the polarization of viewpoints in the U.S. is likely to dictate how domestic investors react, while international investors may focus more on the risks to the effectiveness of the U.S. federal system. This divergence highlights the complex dynamics shaping market movements, amid looming concerns about civil unrest and government responses. With no significant economic events on the horizon, market reactions may be more influenced by political developments than economic indicators.