Midterms Jolt Dollar and Bonds, but One Hedge Fund Veteran Sees a Stronger Greenback Ahead

What moved markets

The immediate take on a Democratic sweep was simple: a tighter fiscal spigot and softer inflation. That view sparked dollar selling and a bid for Treasuries. Even so, the greenback found its footing on Thursday after earlier touching its weakest mark in more than a month.

Risk appetite took a hit too. The Nasdaq 100 slid 5.8% on Thursday.

One strategist's take

Luigi Buttiglione - formerly head of strategy at Brevan Howard, who left in 2017 and now advises major hedge funds via LB Macro SA - argues the knee-jerk dollar selloff misses the bigger picture. "A weaker Trump should mean a stronger dollar," he said.

He pointed to past episodes when worries about Donald Trump's foreign-policy moves knocked the currency, citing tariffs on allies and rivals alike and even the push to gain control of Greenland. He also said the political shift could give Fed Chairman Kevin Warsh more space to lean into his hawkish tendencies and concentrate on taming inflation with less pressure to cut rates.

Market moves remind investors that new tools can sharpen thoughtful decision making. We're hosting our first ever investor livestream on 11/17 to show you how to use ChatGPT and Claude to invest like a pro, hosted by Briefs Finance CEO Jaspreet Singh. Save your seat.

Rates, growth and the transatlantic gap

Buttiglione expects the US to keep outpacing Europe, with stronger American productivity helping the economy hold up and keeping rates higher than across the Atlantic. At present, futures imply the Fed will deliver two rate increases before mid next year, with the probability of a third sitting at roughly 50%.

More broadly, he said the Republican midterm collapse should reduce market angst around Trump's unpredictable policy swings.

Sector ripple effects and your portfolio

He also noted that if the midterm loss hastens initiatives aimed at bringing the Middle East war to a close, energy prices could fall, providing a boost to parts of the US equity market. That may not extend to areas lifted by the so-called Trump trade, including defense, energy and some tech shares.

Staying curious about evolving technology helps investors find a subtle edge over time. On 11/17, our CEO Jaspreet Singh goes live for our first ever investor livestream on how to use ChatGPT and Claude to invest like a pro. Register to join him.