The Great Rebalancing: Geopolitics and Economy after the US Elections
A World Seeking New Balance
The human brain has 71 structures that help maintain balance, from the frontal lobes to the cortex. Similarly, the world is seeking a new balance after the recent American elections. This change, triggered by Trump’s comeback, is pushing governments and markets to react and limit the impact of this political “earthquake.” Some of these adjustments are already part of Trump’s own plan, while others are responses from the US or even the rest of the world.
Understanding What’s Happening
To understand the situation, we need to consider two things: the elections and financial markets. American voters showed dissatisfaction with Biden’s policies on inflation and immigration. They believe there are limits to raising prices to boost the economy and using high immigration to curb inflation. Similarly, bond markets are sending signals. The Federal Reserve has declared that the inflation fight is almost over, but with inflation still high, concerns remain.
Trump’s Promises
Trump aims to calm markets by promising an end to inflation and cutting public spending, supported by Elon Musk. His approach differs from Merkel’s in Germany, using a populist tone against Washington’s “waste.” However, these cuts may have real effects. To guarantee economic growth without triggering inflation, Trump wants to invest in AI and reduce monopolies. He’s also considering increasing US oil production and lowering immigration.
System Balances
Within the US, other balances are at play. The Federal Reserve will likely keep interest rates around 3.5%, and Trump cannot replace its head until 2026. High rates strengthen the dollar and contain inflation, but the judiciary and the Supreme Court will also balance Trump’s power.
Global Effects
The rest of the world is also involved. Trump’s tariffs aim to bring industry back to the US, but other countries are already devaluing their currencies to stay competitive. Europe and China are considering fiscal and industrial stimulus, while Germany may see a leadership shift from Scholz to Merz, bringing growth-oriented policies.
Financial Market Expectations
Changes are already visible: the dollar is rising, along with the US stock market, while bonds and gold are weakening. Cryptocurrencies like Bitcoin are gaining value. However, it’s hard to expect extreme moves: Trump’s return will support the US stock market, but high valuations will limit gains. Bonds may stabilize, and gold and cryptocurrencies won’t likely experience sharp reversals.
