Debon Securities: The realistic expectation gap of Trump's "three fires"

Dengbang Securities released a research report stating that after the key moment of Trump's inauguration, it is expected that the short-term USD index and US bond interest rates will experience a slight decline and return to stability, suppressing or temporarily alleviating global stock markets and risk assets such as non-ferrous metals. Looking ahead, the market may return to focus on economic data and the specific implementation of Trump's policies. The focus of this week is on the Bank of Japan interest rate decision on Friday. With the short-term weakening of the USD and US bond interest rates, if the Bank of Japan decides to raise interest rates, it may further exacerbate market volatility. Event: On January 20, Eastern Time, the US President-elect Trump officially took office as the 47th President and delivered an inaugural speech. Key points of Dengbang Securities are as follows: Speech content: Strong stance on immigration issues, no mention of imposing tariffs on specific countries Trump's inaugural speech once again emphasized "America First" and stated that he would sign a series of historic executive orders on that day. Specifically, his stance on illegal immigration and drug issues was strong, mentioning that he would declare a national emergency at the southern border of the United States, send troops to the border, and increase efforts to deport criminals. The biggest expectation gap came from the issue of tariffs, as the speech did not mention imposing tariffs on any country but only emphasized comprehensive reform of the US trade system, including the establishment of a dedicated agency for external tariffs, boosting market sentiment. However, Trump later signed a series of executive orders at the White House, announcing a 25% tariff on imports from Canada and Mexico starting from February 1, triggering market expectations of fluctuations. The statements on inflation and government spending were in line with market expectations, emphasizing increasing energy production to control energy prices and general prices. Market impact: Expectations of the "Trump trade" being met led to a decline in the USD index and US bond interest rates, a rise in major global stock indices, and rapid appreciation of the Renminbi. Trump's remarks on tariffs in the speech temporarily eased market concerns, and with the market having already speculated on the "Trump trade" before the inauguration, the day of the inauguration became the point of expectation fulfillment and market reversal. The USD index briefly fell below 108, the 10Y US bond interest rate is currently around 4.54%, and the USD to offshore Renminbi rate briefly dropped to around 7.25. However, with Trump announcing a 25% tariff on Canada and Mexico, market expectations reversed, leading to an uptick in the USD index. Currently, the other executive orders signed by Trump have limited disturbance to the market, mostly reflecting the implementation of previous policy directions, including the TikTok "sell or ban" law being temporarily suspended for the next 75 days, withdrawal from the Paris Agreement and the World Health Organization, and freezing the hiring of federal civilian employees. Risk warnings: Unexpected implementation of Trump's policies; overseas inflation rebounding unexpectedly; global economic sentiment falling short of expectations.