​US inflation has fallen significantly since 2023. At the end of 2023 and the beginning of 2024, US inflation hovered just above 3%, before falling to just below 3% for the remainder of 2024. In September 2024, inflation was on a promising trajectory before picking up in the remaining months. Under "normal" circumstances, inflation is expected to remain between 2% and 3% throughout 2025, with a tendency to fall to 2% by the end of the year. Although inflation has become a frequent topic of discussion, it is still important that it stays below 2% in order to stabilise the economy. Its importance has diminished, especially for the Federal Reserve, which has based most of its recent interest rate decisions on the US labour market. The Fed hiked rates aggressively in 2022 and 2023. Its rate rose to 5.25% - 5.5% by the end of 2023. Initially, markets expected rate cuts in early 2024 to gradually counteract the potential recession. The Fed did not cut rates until autumn 2024, citing the solid state of the economy due to a strong labour market. As soon as this market showed signs of weakness, the Fed began to cut rates aggressively, surprising market participants. However, in its latest cut to 4.25% - 4.5% in December 2024, Powell stated that the Fed would stop cutting aggressively in 2025. He outlined only two 25bp cuts in 2025, which would bring the federal funds rate to between 3.75% and 4% by the end of 2025. Prior to the meeting, expectations were for at least 1% cuts in 2025. Figure 1 shows these developments in more detail.

​Cryptocurrencies keep dominating market news with staggering gains over the past weeks. Ever since Trump won the election in November 2024, cryptocurrencies kept soaring. Trump has been a strong supporter of cryptocurrencies during his race. Unsurprisingly, when he won, optimism about the asset class increased significantly. Enthusiasm increased due to the prospect of finally clear regulation around cryptocurrencies in the US. Under Trump’s administration, he wants to avoid that the US becomes irrelevant for such a promising industry, which is frequently compared to the early tech industry – of which the US is the major hub in the world through strong support during the development of the industry. Additionally, Trump suggested a large Bitcoin reserve, which naturally pushes the price of Bitcoin. He is also filling his departments with strong cryptocurrency advocates to place the US as market leader in the blockchain technology. One of his latest moves is replacing Gary Gensler with Paul Atkins as chair of the SEC. This will likely result in further institutional support, as the asset class matures and clearer regulations are in sight. Institutional adoption is already on the rise with Australia’s AMP adding Bitcoin to its portfolio. Similarly, Ray Dalio and BlackRock are also pushing for the asset class. The previously mentioned factors led Bitcoin to soar from around $60k-$70k prior to Trump’s election to above $100k within slightly more than one month. Inflows in Bitcoin ETFs in November and December also topped the inflows after the initial approval of the first Bitcoin ETFs in the US. As of the time of writing, Bitcoin is trading at $101k with a performance of 140% in 2024. Figure 1 also highlights the steep growth in the past month.

​Cryptocurrencies have exploded in price since Trump's victory. Prior to the election day, Bitcoin hovered between $60k and $70k. Since then, Bitcoin has narrowly missed the $100k on its latest rally. Bitcoin reached a new record high of $99.6k and has since fallen back to $91k. At the time of writing, Bitcoin has risen 37% since Trump was elected for office. With these new highs, Bitcoin nearly reached a market capitalization of $2tn. Figure 1 shows the price and market capitalization of Bitcoin since 2020 and its recent surge. Optimism in the cryptocurrency space increased significantly when Trump was elected to office. He highlighted plans for a government reserve in Bitcoin, progress on cryptocurrency regulation and the replacement of Gary Gensler as chair of the SEC. Gensler has shown a strong tendency against cryptocurrencies and is likely replaced by a person significantly more positive on cryptocurrencies.

​There is no doubt that the US election has had a significant impact on market performance since last week. President-elect Trump achieved a decisive victory, including a win in the popular vote. Furthermore, the Republican Party also secured victories in both the House of Representatives and the Senate. This should facilitate the implementation of the majority of the planned changes. Following the confirmation of Trump as the winner, equities began to rally. While there was already a change in equity sentiment following the first rate cut by the Fed, confidence continued to grow when Trump emerged victorious. The conclusion of the US election in a relatively smooth process undoubtedly had a part to play. This has led to a reduction in uncertainty in global markets. The second significant factor is the election of Trump as President. Investors are confident that the new administration will make financial markets a priority, as was the case in his first term. As a result, the S&P 500 reached a new record high of 6,000 points for the first time. The Nasdaq reached a new milestone, surpassing the 19,000 mark for the first time. In the commodities market, this had the opposite effect. Gold, a traditional asset used to manage uncertainty, saw a decline from its previous highs. In the context of a bullish market sentiment, gold is perceived as a less attractive investment. Investors are inclined to hold risk-on assets with higher potential returns, as opposed to gold, which is used to mitigate risk. The price of gold fell from $2,700 to $2,550 over the past week. Crude oil initially gained, but soon began to decline. The Republican agenda supports fossil fuels and is likely to push the industry forward. This is likely to result in more supply and overall lower prices. WTI crude oil declined from $71 per barrel to $68. Lastly, the big winner from the US election result is the cryptocurrency market. Trump's campaign trail agenda was notably pro-crypto, with a particular emphasis on the potential for the US government to establish a Bitcoin reserve. It should also result in a clear regulation of cryptocurrencies during his tenure. This prospect prompted a surge in Bitcoin’s price, reaching a new record high of $93k. The subsequent 45% rally in slightly more than a week triggered another bull run in the cryptocurrency market, with Ethereum not far behind with gains of 38% in a single week. Figure 1 illustrates the price development since October 2024 and the impact of Trump as US President Elect.