Will Trump change his stance?

In recent weeks, the debates have mostly revolved around
Trump, particularly the changes his return to power could bring to the world.
And, of course, most are expecting the worst…

One of the main concerns is the possibility of new tariffs
being imposed on imports, which could lead to a full-blown trade war, as those
affected will not “buy it” and will likely retaliate.

In this context, the US dollar has strengthened, while other
currencies, including the
EUR/USD pair, have come under pressure. There was speculation that the euro
might return to parity with the dollar.

This Monday, however, the market sharply reversed. It was
not because Trump suddenly decided to soften his protectionist stance, even
towards friendly nations.

Instead, it seems to have been helped by Trump’s recent
choice for U.S. Treasury Secretary Scott Bessent. Under his leadership, markets
expect less global disruption, which has led to a drop in the DXY index.

Under
Bessent’s leadership, investors expect gradual implementation of trade
restrictions, negotiations on the size of tariffs, and efforts to stabilize the
budget deficit.

The issue is that Trump has a confrontational personality,
and few can work with him for long. None of the key officials from his first
administration are still with him today, and they have even become enemies.

What can we expect from the markets?

Analysts see only a bright future. For example, Wells Fargo
has raised its S&P 500 target for the end of 2025 to 6,500-6,700, up from
6,200-6,400, while Goldman Sachs also expects 6,500 points.

Worryingly, the P/E now stands at 28, down from 24 over the
past five years. In other words, the market has become quite expensive, and if
it softens, the correction could be more profound.

Another concern is that seven companies now comprise nearly
a third of the S&P 500 (concentration risk). The impact could be much
greater if something goes wrong with those stocks.

So, while markets are currently very optimistic, we can’t
rule out the chance of a reversal. It’s not guaranteed, but it’s wise not to
ignore the possibility entirely. It’s best to be prepared for the worst.

As always, in times of uncertainty or when things don’t go
according to plan, gold
could be one of the beneficiaries. Who knows, maybe even BTC could become a
safe haven in times of instability.

This article was written by FL Contributors at www.forexlive.com.