Luigi Buttiglione of LB Macro argues that Donald Trump’s midterm election setback could paradoxically strengthen the dollar. While markets initially sold the greenback on fears of reduced fiscal stimulus, Buttiglione contends a politically constrained Trump may allow the Federal Reserve to pursue more hawkish policies without pressure to cut rates. He notes that lower energy prices—driven by expectations of ending the Middle East war—could boost US stocks.
S&P futures rose after Wednesday’s sharp gain. The analyst sees continued US economic divergence from Europe, with stronger productivity supporting higher rates. Traders price two Fed hikes by mid-2025, with a 50% chance of a third.
Buttiglione believes reduced policy unpredictability will ease investor anxiety, calling the midterm outcome a sign that US checks and balances remain functional.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing