Markets Misread Trump Win, Says Ex-Goldman Sachs Analyst: ‘Tariff Prospects Not Good For Equities’
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As the US dollar hit a new 52-week high on Friday morning at 108,071, former Goldman Sachs FX strategist and senior fellow at the Brookings Institution, Robin Brooks said in X (before Twitter) post that, “The first market got this wrong, driving the stock up too much after November 5.”
He added that “the rate outlook is not necessarily good for equities, but it is clearly good for the Dollar. More dollar strength is coming.
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What happened: The chart Brooks shared compares the S&P 500 Index and the Dollar Index during the victories of President Donald Trump in 2016 and 2024. Measuring the performance of the two indexes since election day on November 5, the Dollar Index rose by approx. 3.5%, outperforming the S&P 500 Index, which advanced 2.9%.
Why It Matters: Tariff increases reduce the demand for imported goods and raise domestic prices above free trade prices, gradually leading to inflation. This leads to monetary tightening which affects equities in the long run.
However, higher rates are positive for the domestic currency as its supply decreases and more money flows into the economy.
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What Other Analysts Are Saying: Now that the Dollar Index has exceeded the previous 52-week high of 107.07, “a break from it can try 108.60 when 105.10 acts as support,” said Kunal Sodhani, vice president of the global trading center at Shinhan Bank.
According to him, “ongoing geopolitical tensions in the Middle East combined with strong US economic data and the Federal Reserve’s cautious rhetoric on interest rate cuts, could push the US Dollar to new highs”
As of Friday, the SPDR S&P 500 ETF Trust (NYSE: SPY ) had gained 25.60% year-to-date, while the Invesco QQQ Trust, Series 1 (NASDAQ: QQQ ) was up 25.43%, according to Benzinga Pro. Despite this strong return, both ETFs fell slightly in pre-market trading on Friday.
Meanwhile, futures show declines in the main indices: Nasdaq 100 down 0.51%, S&P 500 down 0.40%, Dow Jones down 0.29%, and R2K is down 0.08%.
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This article Markets Misread Trump Win, Says Ex-Goldman Sachs Analyst: ‘Rate Outlook Not Good For Equities’ originally appeared on Benzinga.com
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