Bad political or economic news that might be expected to crush another bond markets or another currencies, just seems to wash off the US dollar and treasuries.

The first, and probably most obvious, thing to say about US assets, particularly the dollar and treasuries, is that they seem to be Teflon-coated given the dominance of both on the global stage. Bad political or economic news that might be expected to crush another bond markets or another currencies, just seems to wash off the USDdollar and treasuries.

If you are not sure about this just compare the debt-ceiling crisis in the US a few months ago, which barely touched treasuries and the dollar, with the UK panic last September when injudicious fiscal largesse by former PM Truss upended gilts and the pound. Now clearly we could argue that the two are not really comparable. That the US goes through these debt-ceiling complications on a fairly regular basis while the UK government has never before put out a budget while refusing to release the assessment of its own independent budget watchdog (the Office for Budget Responsibility). But we’d still argue that dollar and treasury domination serves to insulate the US greatly from financial strains while many others, like the UK, can only too easily upset the markets on account of their much weaker global financial influence.

Another point is that if anybody is going to punish the dollar and treasuries on account of dubious governance in the US, then they have to go somewhere else that is presumably of better stature. But any such challengers seem few and far between. And besides, what the US has in spite of, or perhaps even because of, its rather dysfunctional political system is an economy that still seems more dynamic than most. And whatever the political misgivings people might have, economic outperformance appears to be a facet that continues to entice investors into the dollar and treasuries.

This Teflon-coating of the dollar and treasuries seems to be shared by former president Donald Trump who seemingly becomes more popular despite the fact that the indictments are piling up. Should he gain the Republican nomination, which looks likely at this stage, it’s a fair bet that we will be in for another close election outcome in November 2024. Of course, we can’t be sure that Trump will be nominated or that he will be able to campaign for the presidency if he does, such are the criminal charges hanging over the former president.

Nonetheless, at this early stage, it still seems reasonable to assume that he will run and certainly not unreasonable to think that he could win. Would the prospect of a second Trump term undermine US assets, perhaps especially if the charges against him are upheld?

Mr. Steve Barrow, Head of Standard Bank G10 Strategy is not sure that it would for a number of reasons. The first is the Teflon-coating of US assets the Standard Bank spoke about before and, don’t forget, that when Trump won first time around the reaction was very positive in some US assets, particularly stocks.

A second issue is that Trump’s antagonism of China on trade has been carried on, and perhaps even turned up a notch, by the Biden administration. Hence a Trump win would not mean going back to a trade war with China because that “war” has never really ended.

And finally, there’s the US economic dynamism we spoke about before which also seems to Teflon-coat US assets and that’s not going to change under Trump. Indeed, it might even increase if he runs and puts significant corporate tax cuts on the agenda again. But does all this suggest US assets like the dollar and treasuries will rally if Trump gets past these political difficulties and gets back into the White House? No, it does not. All we’d argue here is that these assets are not especially vulnerable to such political upheaval; at least not like we saw for gilts and the pound when UK politics was pulled through the wringer last September.