Trading action since Donald Trump’s election win Tuesday signals that investors believe he will make good on his infrastructure-spending plans.
Industrial metals have gained this week on the expectation for higher demand.
Take copper, for example, which rose Thursday to a one-year high on the London Metals Exchange. The metal, which is found in electrical wiring, plumbing, and other core parts of construction projects, gained more than 4% to $5,712.50 a tonne.
- Markets Insider
Copper’s rise is more evidence that investors expect Trump’s administration to boost domestic spending and inflation.
It is another sign that Trump’s win is “reflating America but not really driving risk appetite overseas,” said Neil Dutta, the head of US economics at Renaissance Macro. Dutta noted that the Chilean peso, which typically gains with copper as the metal is a chief export, is selling off. This reinforces Trump’s “America first” narrative, Dutta said.
Other industrial metals including iron ore, nickel, and aluminum have rallied.
Before the elections, Trump was considered the riskier candidate, and many touted a doomsday scenario in markets, at least initially, if he won.
However, Wall Street’s apparent optimism on Trump’s policies post-election is partly driven by the Republican sweep of both the Senate and the House of Representatives, against expectations.
This triple sweep could make it easier to scale back the influence of regulatory measures like Dodd-Frank, and push through infrastructure spending that’s considered pro-business.
“Trump’s promises to increase infrastructure spending in his victory speech yesterday (pledging to begin the urgent task of rebuilding America) came alongside a perceived change in demeanor from the President Elect, forcing markets worldwide to reassess their view of the connotations of ‘the Donald’ sitting in the Oval Office,” said Henry Croft, a research analyst at Accendo Markets, in a note.