Crypto News: Markets Daily: Chasing the Trump rally

Bitcoin's rally cools after a weeklong, post-US election surge that lifted it past $89,000.
Stock markets globally are also losing momentum. US equity futures drop and Treasury yields rise. Trump's victory continues to pull money out of international markets, with the Hang Seng falling almost 3%.
Helping drive today's selloff in Asia: Trump reportedly is picking China hawks like Marco Rubio for key administration jobs. He also chose pro-Israel lawmakers for top foreign policy posts, underscoring that his focus will be on supporting Israel and boxing in Iran.
Investor exposure to US stocks jumped to the highest since 2013 on optimism about the economy after the election, a Bank of America survey of fund managers shows.
China may embrace more stimulus, bolster manufacturing, and allow the yuan to weaken to offset the negative effects of the Trump presidency, according to economists surveyed by Bloomberg News.

All year, stock pickers have been caught off-guard by the never-ending rally in risk assets. Now, with the S&P 500 notching its 51st record of the year, following Donald Trump's presidential victory, catching up with the boom is becoming a career-defining matter.

This, in a nutshell, is one reason bulls have taken control. Forget oncoming tax cuts and deregulation for now -- there's even more fuel left to power a stock run-up that is already the best for this time of year since 1995.

That helps explain why fund managers in that Bank of America survey report that their exposure to US stocks surged last week. The number of fund managers overweight US stocks nearly tripled to a net 29%.

And Citigroup says investors last week pushed their exposure to the S&P 500 to the highest in three years.

Given how quickly this rally unfolded, it wouldn't be a surprise at all to see it run out of steam for a bit, as the Citi strategists warn. But the Trump tailwind is a powerful one.

Before last week's election, active managers, from mutual funds to hedge funds, had underperformed the market by either keeping their equity holdings too lean or pivoting toward the wrong stocks.

So, with Trump's return to the White House reigniting animal spirits -- driving the S&P 500 above 6,000 -- these money managers are under pressure to make up for the lost ground. Especially with just weeks left before the end of 2024.

In fact, it's a trend that plays out year in, year out. Bank of America notes that stocks with the highest volatility, known as beta, have tended to beat the market in the final two months, in part thanks to investors diving into high-octane shares in a bid to juice their performance.

Funds tracked by BofA have been particularly allergic to risk taking this election season so far, suggesting there's even more pressure this time round for investment managers to get bullish. With cautious institutions poised to chase the rally, no wonder Goldman Sachs strategists led by David Kostin see room for even more equity gains.

"As political uncertainty declines and investor positioning normalizes, an increase in length should support the typical pattern of S&P 500 appreciation following presidential elections," they wrote in a note. —Lu Wang

Grab Holdings, the largest of Southeast Asia's ride-hailing and delivery firms, jumps 12% in premarket trading after raising earnings forecasts. If the gains hold, the stock will hit the highest since 2022. The shares are still about 75% below the 2021 record.

On that theme of the rally running out of steam: Tesla is dropping 3%, the first retreat after a five-day, 44% surge, while crypto stocks like MicroStrategy also are slipping. —Subrat Patnaik

Currency strategists are shredding forecasts for the euro in the wake of the US election and coming up with a new call: a slide toward parity with the dollar.

At least 10 banks — including Barclays Plc, Deutsche Bank AG and Nomura International Plc — have slashed their calls in the past week, a turnaround from recent months when many were lifting the outlook for the common currency. Pictet Wealth Management is among those calling for a 6% drop to parity. And bets in the options market show traders wagering against the euro as a favorite way to play the outlook for Donald Trump's presidency.

The changing landscape in the currency market follows anticipation that global trade restrictions could become a key pillar of Trump's economic policy when he returns to the White House next year. That's been prompting investors to dump the euro — it's already down nearly 3% since his victory — as tariffs would hurt Europe's export industries at a time of political uncertainty in its major economies.

"This is the worst-case scenario you can think of for the euro," said Mark McCormick, the global head of FX and EM strategy at TD Securities, who expects the euro to fall to $1.03 by the time Trump takes office in January. Parity "is absolutely in play" after that, he said.

The options market is also signaling more weakness for the euro. Data from the Depository Trust & Clearing Corp. show that around €2 billion was wagered last month on vanilla options for the euro falling to $1 next year. —Naomi Tajitsu and Anchalee Worrachate

"The most important thing to focus on with this Bitcoin rally right now is that this liquidity is sloshing around the global system in ways that will continue to drive markets. This isn't normal market fundamentals driving markets; this is liquidity sloshing from one area of the market to another. This is an example of something we would fade.''

Erik Knutzen

Co-chief investment officer, multi-asset strategies, Neuberger Berman

Watch the full Bloomberg TV interview here.

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