“Buy the Election, sell the Inauguration” is the prevailing strategy on Wall Street, as President-Elect Donald Trump formally takes over the reins on 20 January. The upcoming inauguration have prompted Investment banks including Morgan Stanley and Goldman Sachs to issue bearish market forecasts.
Since Mr. Trump’s election in November, markets globally had recorded major gains. There are signs that they are starting to reverse. The Dow Jones Industrial Average has struggled to break through the 20,000 level for half a month, and the S&P 500 Index is experiencing unusually high volatility. Gold prices have rebounded, and 10-year U.S. Treasury yields have declined after reaching 2.6%.
According to Goldman Sachs, any bull market for U.S. stocks will last no more than 90 days. Morgan Stanley said markets may have peaked in the short term. Mr. Trump’s inauguration may prove to be a key inflection point.
Investors around the world are uneasy about Mr. Trump’s trade policies. He told the Wall Street Journal last week that the dollar was "too strong" because China deliberately let the yuan depreciate, setting off volatility in global currency markets.
This week, Chinese President Xi Jinping warned against trade protectionism at the World Economic Forum at Davos. Mr. Xi again said China won’t try to lower the yuan’s value to gain trade advantages. In the past week, there had been a strong rally in the yuan, which rose to the strongest level in two months.