Trump Targets China Again: Will Tesla Benefit If He’s Elected?

1. Digital Asset Market: Before the U.S. elections, crypto traders have locked in $345.83 million in bitcoin options, specifically targeting the event's outcome with contracts expiring four days post-November 4. Data reveals a strong bullish sentiment, with 67% of the open interest in call options, resulting in a put-call ratio of less than 0.50. This signifies twice as many call options as put options, indicating traders' optimistic expectations. Algorithmic trading firm Wintermute highlighted that these election-dedicated contracts enable investors to speculate on how election results might impact crypto markets, reflecting a strategically bullish outlook. The open interest in Call options varies from $70K to $140K for options maturing four days after the US presidential elections. The biggest open interest of around $39M is locked in $80K strike calls
   

2. Macro Economics: Donald Trump's suggestion to implement 10% to 20% tariffs on imported goods has reignited trade debates in the 2024 presidential campaign. Trump asserts this approach as a reciprocal trade policy to balance perceived inequities. Democrats, including Kamala Harris and President Joe Biden, criticize the proposal as a "national sales tax" that would raise prices on essentials like food and gas. Economists and trade experts warn that these tariffs would ultimately burden U.S. consumers with higher costs. Despite Trump's claims that tariffs would not impact the U.S. adversely, experts argue that, historically, tariffs have raised consumer prices and could lead to significant additional costs for middle-class households.
   

   In other news, Gold prices have surged over 20% this year and are currently at an all-time high of $2560 on COMEX, breaking records due to multiple factors. Concerns about potential dollar debasement, driven by anticipated government policies like price controls on food inflation, push investors towards gold as a hedge. Additionally, the expectation of the Federal Reserve cutting interest rates soon, increased central bank gold purchases, and demand for portfolio diversification all contribute to the metal's rally. Given these dynamics, banks such as UBS and ANZ see further potential for gold gains.
   

3. Equities: Today, stocks saw modest declines with the Dow Jones Industrial Average falling 0.2%, and similar dips in the S&P 500 and Nasdaq Composite, following eight consecutive positive sessions for the latter two,  indicating a brief pause in a strong recovery rally. The market has rebounded impressively from earlier volatility, driven by robust retail sales and a mild inflation report, with both the S&P 500 and Nasdaq up over 1% for the month. As investors prepare for the Federal Reserve’s Jackson Hole Economic Symposium and analyze upcoming Fed minutes, market sentiment is buoyed by a return to economic fundamentals, though some stocks like Lowe's and Bank of America experienced specific downturns. Meanwhile, shares of Palo Alto Networks surged about 8% during midday trading, driven by a stronger-than-expected fiscal fourth quarter and robust future guidance.

4. The Fed and US Treasury: Ahead of Federal Reserve Chair Jerome Powell's upcoming speech at the Jackson Hole symposium and the central bank's September meeting, Jay Barry, co-head of U.S. interest rate strategy at JPMorgan, believes that Treasury yields will likely remain within a certain range. He stated on CNBC's "Squawk on the Street" that yields would only move significantly lower if there is a recession. Barry notes that with the Fed's anticipated start cutting rates soon, the current Fed policy is more restrictive than it has been in the past 30 years. Meanwhile, the 10-year Treasury yield was noted to be slightly lower, trading at 3.824%.

5. Geopolitical: While Trump is suggesting raising tariffs by 10-20%, the European Commission plans to impose five-year import duties on Chinese electric vehicles (EVs) to counteract what it claims are unfair state subsidies that undermine European competitors. These duties will range up to 36 percent. Tesla, which also manufactures in China, will face a lower duty of nine percent due to receiving fewer Chinese subsidies. Provisional tariffs had already been placed on Chinese EVs last month, and the new definitive measures are pending feedback and approval. Key Chinese manufacturers will face varying duty rates: BYD at 17 percent, Geely at 19.3 percent, and SAIC at 36.3 percent. Other cooperating manufacturers will face 21.3 percent, while non-cooperators will encounter the maximum 36.3 percent duty. China opposes these tariffs and has appealed to the World Trade Organization. The EU seeks a WTO-compliant alternative solution, contingent on China's proposals. The backdrop includes ongoing trade tensions between China and the EU across several sectors.
   

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View from our desk

BTC prices remain range-bound between 58K and 60K, with a small positive trend expected to continue throughout the week, barring any significant news. This pattern of oscillation reflects the current market sentiment, which has been relatively stable. As previously indicated in our weekly briefs, the next major trade opportunity appears to be tied to the upcoming U.S. elections. This is supported by the surge in Options Open Interest, particularly in Call Options at the $80K strike price—a level significantly higher than the current sub-$60K prices. The upside potential now outweighs the downside risk, suggesting a favorable outlook for long positions.

In broader financial markets, attention is focused on Federal Reserve Chairman Jerome Powell's upcoming Jackson Hole speech on Friday. Markets anticipate Powell will offer hints about an imminent rate cut in September, though the exact size remains uncertain. While the market is speculating between a 25-basis-point cut and a 50-basis-point cut, a 25-basis-point reduction seems the most likely scenario at this time.

Additionally, noteworthy news today includes former President Trump's suggestion to raise tariffs on Chinese goods, alongside the European Commission's plans to impose similar tariffs on Chinese electric vehicles (EVs). During his presidency, Trump's previous tariff increases had little effect on reshoring production or creating jobs in America; instead, they contributed to inflation and acted as an indirect tax on the lower-income population. With Trump's recent offer to Elon Musk to serve as an advisor—a role Musk has tentatively accepted—it seems Tesla may benefit most from these proposed tariffs.

Happy Trading!

The 1Konto Team

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