Haven rush, 'Trump Trades' on investor minds after shooting

Traders will initially rush into haven assets and reevaluate trades most linked to former President Donald Trump's candidacy after he was shot at a rally, according to market watchers.

"Undoubtedly there'll be some protectionist or haven flows in Asia in the early morning," said Nick Twidale, chief market analyst at ATFX Global Markets. "I'd suspect gold could test all time highs, we will see the yen getting bought and the dollar, and flows into Treasuries too."

However, early market commentary suggests the shooting will boost Trump's chances of winning the election, which will shift focus to securities most exposed to his policies and may ultimately be negative for Treasuries.

Graph: Bloomberg

Assets linked to the so-called Trump trade range from the dollar to Treasuries to the shares of private prisons, credit-card companies and health insurance firms. Investors see the Republican's policies on tariffs, immigration and deficits leading to a stronger dollar, higher bond yields and a more favourable environment for those equity sectors.

Traders will also closely watch market measures of expected volatility on Monday, such as those on the tariff-sensitive Chinese yuan, which had begun to price in the US vote.

Trump said he was shot in the right ear after gunfire erupted at his political rally in Butler, Pennsylvania. His campaign said in a statement that he was "fine" after the incident, which saw him rushed from the stage. One attendee at the rally was shot and died, and the shooter was killed by the US Secret Service.

Strategists had already expected a volatile run into the November election, not least because Democrats are still agonising over President Joe Biden's candidacy after his debate performance last month. Investors were also grappling with the possibility that the election may end in a protracted dispute or political violence.

But there is little precedent for events like Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market dipped before closing early. The next day, March 31, 1981, the S&P 500 rose over 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.

Bond investors should pay particular attention as the attack is likely to boost Trump's election chances, according to Marko Papic, California-based chief strategist at BCA Research Inc.

"I do think that the bond market should at some point, become aware of President Trump's higher odds of winning the White House than any of his rivals," Papic wrote. "And I continue to believe that as his odds rise, so should the probability of a bond market riot."

Kyle Rodda, senior financial market analyst at Capital.com, said he was seeing client flows into Bitcoin and gold after the shooting. The cryptocurrency advanced after the news broke.

"This news marks a changing point in American political norms and the emergency of greater political violence," he said. "For markets, it means haven trades but more skewed towards non-traditional havens."