Weeks Issue Check: Trump, Musk, and Ueda
- Trump’s Hope and Implications of Government Shutdown Issue
At the last FOMC, the Fed’s 2025 interest rate forecast and Fed Chairman Powell’s remarks on neutral interest rates caused the dollar, interest rates, and the stock market to have a seizure. However, it can be said that it was too excessive given that much of the related content has already been reflected in the market. Rather, it can be said that the related seizure was affected by the government shutdown issue along with the supply and demand factors for futures options expiration date.
The U.S. stock market has continued to rise since Trump’s election. In the meantime, Trump has recently mentioned four priorities during his term: 1) strong economic growth, 2) reduced budget deficit, 3) improved trade deficit, and 4) increased stock market. The market responded with a strong rise, predicting that Trump will cut taxes after the presidential election to help revitalize the stock market. The problem is that the only way to have all four of Trump’s priorities is to weaken the dollar. For example, lowering corporate taxes increases the deficit, and imposing tariffs to improve trade deficits can cause instability in the economy and stock market due to rising prices. Therefore, Trump is at a crossroads of choosing the priorities he mentioned
Meanwhile, Trump has opened a government efficiency department (DOGE) to make efforts to reduce government spending. In response, Elon Musk mentioned reducing defense spending, which accounts for the largest amount of spending. However, the fiscal committee was already making related efforts in Congress, and in fact, the fiscal responsibility law in 2023 was used to reduce spending. So, even though it’s not new, Elon Musk has taken control of Congress and publicly criticized lawmakers who don’t follow what he said.
The extraordinary budget bill was also set to be passed by an agreement between the Democratic Party and the Republican Party, but if it is passed by Musk’s strong criticism, he will be kicked out of the House of Representatives elections in two years. As Trump also opposed the plan, mentioning the suspension of the debt limit, the Republican Party announced an amendment to suspend the debt limit for two years (previously ending at the end of this year). However, as the related amendment was rejected by the House of Representatives, the issue of government shutdown suddenly emerged.
In response, the temporary budget bill, excluding the debt limit period, was finally passed on Friday evening, and whether to extend the debt limit in early January was underway. Eventually, Republican lawmakers were affected by Musk’s pressure, resulting in a government shutdown issue, and related anxiety can be seen as a seizure in the stock market. Of course, the issue of shutdown has been resolved by the passage of the temporary budget bill, but it is noted that Musk’s sudden remarks could increase market uncertainty in the future. Market participants analyzed that this is an example of political instability, with Democratic lawmakers also criticizing Musk in a strong tone, asking if he is the president of the United States. As political uncertainty could affect the economy in the future, Musk’s remarks should be watched in 2025, following Trump
- Japanese yen and Ueda governor
In December, the BOK left interest rates unchanged, and the BOK Governor Ueda noted that the rate hike was not as fast as expected. As a result, the yen’s weakness expands and it also affects the dollar’s strength. However, the Japanese core consumer price index, which was announced afterwards, rose 2.7% year-on-year, significantly exceeding the 2.3% announced in October. This increasing pressure on inflation has raised expectations for a rate hike at the BPJ meeting in January. Meanwhile, BPJ Governor Ueda’s speech to the Economic Federation on December 25 is prepared, and the Tokyo Consumer Price Index, which plays a leading role in the Consumer Price Index, will be announced on the 27th. Depending on the results, expectations for a rate hike in January may be raised, which may affect the yen, which may increase the possibility of a fall in the dollar/won exchange rate (the won’s strength).
*Key Indicators and Schedules
December 23 (Monday)
UK: GDP growth in Q3
U.S.: Chicago Fed’s National Activity Index, Consumer Confidence Index
Bonds: Two-year U.S. Treasury bid
12/24 (Tue)
Korea: Consumer Confidence Index
U.S.: Durable goods orders, number of new home sales
Bonds: U.S. five-year Treasury bid
Bank: BOJ (Japan) Releases RBA (Australia) Minutes
Early closure: United States, United Kingdom, Hong Kong, Australia, France
Closed: Germany
12/25 (Wednesday)
Open: Japan Opens in China
Closed: Korea, United States, Hong Kong, United Kingdom, Germany, etc
Remarks: BOJ Governor Ueda
12/26 (Thursday)
Korea: Dividend Base Date
Bonds: U.S. 7-year Treasury bid
Closed: UK, Germany, France, etc
December 27 (Friday)
Korea: Dividends Day
Japan: Unemployment, Tokyo Consumer Price Index
China: Industrial Profits