- Donald Trump has survived a shocking assassination attempt over the weekend.
- The former president's odds of winning could increase amid sympathy and his defiance.
- Markets may react with a risk-off reaction on fears of higher rates as a result of a clean Republican sweep.
Fist in the air and on with the fight -- that has been the historic picture that former President Donald Trump shortly after he survived an assassination attempt on his life. Trump was injured in his ear but seems to have come out stronger politically from the shocking political violence.
The 45th president tends to portray himself as a victim, and at least in this case, he certainly is one. The violence inflicted upon him will likely cause some voters to feel sympathy for him.
Moreover, the raised fist, representing defiance and resistance, are set to galvanize supporters to get out the vote for him. Trump had already been leading in the polls following President Joe Biden disastrous debate performance on June 27. Since then, Biden's Democratic Party has been tearing itself apart about the political future of their standard-bearer.
The assassination attempt raises not only Trump's chances of winning, but also of a clean sweep by the Republican Party. If the GOP gains control of the White House and the two chambers of Congress, it could enact tax cuts which would increase the deficit.
That is how it works. When one party has control, it is either tax cuts by Republicans or more spending by Democrats. Both cases lead to a higher deficit, while a split Congress hardly approves anything.
In case of a higher deficit, bonds would be sold off on fears of higher supply, and of a re-acceleration of inflation. In turn, the Federal Reserve would have to keep interest rates higher for longer.
What does that mean for markets? Higher returns on US debt make yieldess Gold less attractive. Stock investors prefer lower borrowing costs, and higher ones may send them down.
The big beneficiary may be the US Dollar. The Greenback benefits from both higher yields and the risk-off environment. Political violence bad news, and in times of trouble, the world's reserve currency is a winner.
All in all, the assassination attempt on Trump's life may cause Gold and stocks to suffer, and boost the US Dollar. Opinion polls and ongoing coverage will determine how long this story lasts and impacts markets.
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