MacroVoices #455 Daniel Lacalle: Is The Trump Trade Over?

Episode Summary

Executive Summary: Macro Voices Episode 455 centered on the post-election “Trump trades,” with Daniel LaCalle arguing the U.S. dollar likely has further upside, while recent equity and cyclical moves may be overextended. The discussion then shifted sharply to geopolitical escalation after Biden authorized Ukraine to use U.S. missiles deeper inside Russia, lifting gold and energy. The episode closed on tariffs, inflation, DOGE-style fiscal cuts, and the possibility of a more assertive U.S. reserve-currency strategy that could include Bitcoin.

Main Topics: Trump trade momentum and market overextension (Priority: 5/5): LaCalle argued the post-election move in the dollar, cyclicals, and small caps likely ran too far too fast, with markets repositioning into a more U.S.-centric allocation and potentially vulnerable to a pause or reversal in some crowded trades. U.S. dollar strength and reserve-currency demand (Priority: 5/5): Both the interview and post-game emphasized that the dollar remains structurally strong, with room to extend higher versus euro- and yen-heavy baskets due to weak Europe, yen pressure, and global demand for USD. Ukraine escalation and geopolitical risk premium (Priority: 5/5): Biden’s authorization for Ukraine to use U.S. ATACMS deeper into Russia was framed as a major escalation that could raise nuclear-risk perceptions, support gold and energy, and increase market volatility. Gold, oil, and energy as geopolitical hedges (Priority: 4/5): LaCalle and the hosts discussed gold as a protective asset and oil as range-bound but supported by geopolitics, with upside limited by weak global demand and oversupply. Tariffs, trade war, and U.S.-China tensions (Priority: 4/5): The conversation portrayed tariffs as economically negative but politically useful, likely to intensify U.S.-China friction while supporting USD demand; trade war was described as ongoing rather than absent under Biden. Fiscal austerity, DOGE, and inflation control (Priority: 4/5): LaCalle argued Trump cannot tame inflation without meaningful discretionary spending cuts, deregulation, and stronger dollar policy; DOGE was framed as an advisory vehicle that may help identify cuts but not solve the fiscal problem alone. Bitcoin, Treasury, and the future of monetary power (Priority: 3/5): The discussion explored the possibility of a Treasury Secretary more open to Bitcoin reserves and a stronger pro-USD, pro-Bitcoin policy mix, with implications for the ECB/BOJ and global fiat competition.

Key Arguments: The post-election surge in the dollar and U.S. equities may be driven by both fund-flow rebalancing and fear of missing out, making some of the move vulnerable to consolidation. The dollar’s strength is broader than the DXY suggests because the trade-weighted basket shows faster appreciation against key trading partners. Ukraine’s authorization to strike deeper into Russia is an unusually risky escalation and could provoke counter-escalation, especially during the U.S. transition period. Gold should be used as a hedge in a worsening geopolitical environment; the recent correction created a potentially attractive entry point. Oil is supported by geopolitical risk, but weak global manufacturing demand and oversupply likely cap upside. Tariffs are not a “magic wand”; they may help strengthen USD demand and bargaining leverage, but they do not solve the U.S. fiscal deficit. Trump’s inflation fight requires discretionary spending cuts, deregulation, and stronger productivity, not just tariffs or growth rhetoric. DOGE may help identify waste, but real deficit reduction requires granular cuts in many small budget items plus letting certain spending programs fade. A U.S. Treasury Secretary sympathetic to Bitcoin would represent a major break from past policy and could strengthen both the dollar and Bitcoin relative to other fiat and crypto assets. If the Fed becomes less aligned with the ECB/BOJ and defends USD purchasing power more aggressively, the euro and yen could weaken materially.

Data Points: Macro Voices episode: 455 - Episode number announced at the start of the show Production date: November 21, 2024 - Episode production date SP 500 futures: down 131 basis points to 5930 - Macro Scoreboard week over week as of Nov. 20, 2024 Dollar index (DXY): 106.63, up 14 basis points - Consolidating at two-year highs WTI crude (Jan.): 68.75, up 47 basis points - In primary downtrend but consolidating at support RBOB gasoline (Jan.): 199, up 258 basis points - Energy prices rebounding Gold (Dec.): 2650, up 380 basis points - Recovering after a quick correction Copper: 415, up 349 basis points - Still in correction and testing support Uranium: 79.30, up 128 basis points - Spot/related uranium pricing rebounding U.S. 10-year Treasury yield: 441, down 4 basis points - Treasury yield lower on the week DXY critical level: 107 - Watched as potential breakout or pause point Dollar upside target range: 112 to 114 - 2022 highs as the next major resistance area if DXY breaks out Gold key level: 2700 - Critical upside hurdle; above it could open path toward 3000 Gold upside scenario: 3000 by January - Possible if gold consolidates above 2700 Crude support: about $67 - Three-month support line on crude oil chart Crude resistance zone: $70 to $71 - Near-term technical test for the oil bounce Brent trading range: $73 bottom to $80 range - LaCalle described a range-bound trading setup NVIDIA support: $130 - Post-earnings technical level to watch S&P support zone: 5850 to 5900 - Chart support area on the rising wedge S&P upside target: 6100 to 6200 - If support holds and channel remains intact Daily U.S. government job growth: about 43,000 per month - LaCalle cited this pace over the past four years Potential budget reduction: half a trillion dollars - LaCalle said Biden-era spending increases could be rolled back Inflation Reduction Act follow-on savings: about $250 billion over three years - Estimated future spending if the program is allowed to fade Target deficit after cuts: around $1 trillion - LaCalle suggested this would still be large but more manageable

Pivotal Quotes: "I think it's probably run too fast, and we need to at least take a look." — Daniel LaCalle: On whether the post-election Trump trades in the dollar and equities had become overextended "Tariffs are not sort of a magic wand that is going to solve everything and allow the U.S. to abolish all taxes." — Daniel LaCalle: On Trump’s tariff agenda and its limits as a solution to inflation and fiscal deficits "It does not make any sense whatsoever for the Biden administration to make such a leap in terms of the escalation of the conflict." — Daniel LaCalle: On the authorization for Ukraine to strike deeper into Russia

Implications: Expect volatility in the dollar, gold, and energy as geopolitics and policy shifts collide. The episode implies stronger USD bias, caution on Europe and EM, and closer attention to fiscal cuts, tariffs, and any move toward Bitcoin-friendly reserve policy.