Hello everyone, welcome to “Economic Way” on Epoch Times. Today, let’s focus on the impact of Trump’s victory on the economy.
Today’s focus: Two tycoons aiming to tackle the U.S. “bureaucracy”! October CPI data released, will the Fed continue to cut interest rates? Trump catches gold bulls off guard! Despite Fed rate cut, why are mortgage rates rising?
This past Tuesday (November 12th), the price of gold dropped to its lowest level in nearly two months. The spot gold price fell by 0.51% to $2,606.05 per ounce, while gold futures dropped by 0.2% to $2,611.30 per ounce.
The news of Trump’s victory led to a strengthening of the dollar, pushing the dollar index to a four-month high, putting pressure on gold.
Analysts say the bigger issue facing gold is asset competition – with the strong performance of the U.S. stock market post-election, funds are flowing into the market, impacting gold prices. Analysts predict that at the current levels, gold prices could drop to a range of $2,500 to $2,600 per ounce by the end of the year.
Currently, the market focus is on the release of the October Consumer Price Index on Wednesday and the Producer Price Index on Thursday, along with the latest unemployment numbers and retail sales data to provide insight into the Fed’s next rate cut decision and the extent of the cut.
Following Trump’s victory, the potential Cabinet members have been a hot topic of discussion. According to Japanese media reports, Trump is likely to nominate billionaire hedge fund investor Scott Bessent as Secretary of the Treasury.
Previously, when asked if he would join the Trump administration, Bessent told reporters: “I will do anything according to President Trump’s request.”
If ultimately nominated and confirmed by the Senate, Bessent will hold one of the most powerful positions in the Trump administration.
The U.S. Treasury Secretary’s task is to maintain stability in the U.S. bond market, assist in devising and executing the president’s economic agenda, and participate in imposing sanctions against hostile countries, including sanctions against the CCP and Russia.
In a recent interview with British media, Bessent described Trump’s threat of imposing comprehensive tariffs on imported products as “extreme.” He suggested that President Trump could gradually impose tariffs so that any inflation impact would gradually manifest over time, offsetting its negative effects through relaxation of controls and other deflationary policies.
He also hinted that he supports traditional views of the Treasury Department, including the importance of a strong dollar as a world reserve currency. During his first term, Trump expressed his dissatisfaction with a strong dollar as it would pose difficulties for American exporters like Boeing.
Furthermore, Bessent has expressed discontent with the Fed in the past, even suggesting that Fed Chair Powell should resign sooner rather than later. In conclusion, the future of America’s financial system under Trump’s new policies will ensure the country’s economic prosperity.
The U.S. Bureau of Labor Statistics released the latest economic data on Wednesday. The U.S. October CPI – Consumer Price Index growth rate rose to 2.6% year-over-year, a new high in three months, with a 0.2% increase month-over-month. The core CPI also rose by 0.3% month-over-month, with a 3.3% year-over-year increase, all in line with expectations. Wall Street analysts suggest that the Fed is almost certain to cut rates again next month, but the market still needs to assess the impact of inflation under the incoming President Trump, which could lead the Fed to slow down rate cuts next year.
During last week’s news conference, Fed Chair Powell hinted that the Fed is prepared to address higher-than-expected CPI.
Powell stated that he did not consider wage growth as the reason for a return of inflation. He mentioned, “It’s just a matter of time, not a reflection of current inflation pressures, but of past inflation pressures. Clearly, we have not yet won, but we believe inflation will continue to decline along a volatile path. Good or bad data in the next month or two will not really change our expectations.”
Now, let’s take a look at what Wall Street experts have to say about the October CPI and other economic data, as well as their expectations for the Fed’s future actions.
First, Ellen Zentner, Chief Economic Strategist at Morgan Stanley, stated: “The CPI data was as expected, so the Fed is likely to cut rates again in December as planned. However, the situation next year will be different. Given the possibility of increased tariffs and uncertainties about other policies of the Trump administration, the market is already considering that the Fed may cut rates less frequently in 2025 than previously expected and there is likely to be a pause in January next year.”
Seema Shah, Chief Global Strategist at Principal Asset Management, added: “Given concerns that Trump’s economic policies may lead to higher inflation, today’s market seems to be prepared for higher-than-expected inflation. Higher inflation could have allowed the Fed to stand pat at the next meeting, but the October CPI data met everyone’s expectations, so a rate cut in December is still on the agenda. It is expected that by early 2025, the Fed may slow down the pace of rate cuts rather than cutting rates at every meeting.”
Quincy Krosby, Chief Global Strategist at LPL Financial, told the media: “All components of the CPI met expectations, which relieved the bond market, resulting in a slight decline in the yield of 10-year bonds. Stocks and futures made slight gains, with stocks showing strong performance for several days in a row. The focus is currently on bond yields, as concerns about inflation continue to dominate headlines.”
Brian Jacobsen, Chief Economist at Annex Wealth Management, expressed optimism about the outlook, saying: “The data met expectations, but there are signs of further improvement in the details. Durable goods prices decreased by 2.5% year-over-year, while non-durable goods prices fell by 0.5%. Inflation in the service sector remains significant, but fortunately it is no longer accelerating. The risks of inflation due to changes in tariffs, deficits, or immigration policy changes are currently uncertain unless we receive more details about potential events. There is no need to worry excessively.”
With Trump’s tariff policy leading to a stronger dollar, the market is focusing on the trends of other currencies. Currently, investors are primarily buying options betting on the rise of the dollar against these currencies. According to data from the Depository Trust & Clearing Corporation (DTCC), options trading on the euro against the dollar and the dollar against the yuan were the most active this week.
On the DTCC platform, options trading on the dollar against the offshore yuan amounted to at least $100 million, two-thirds more than the volume of put options.
Beijing announced a plan last week to issue 1 trillion yuan in bonds, aiming to ease the debt crisis of local governments, but failed to introduce more fiscal measures that investors believe could aid economic recovery.
In terms of the euro, the Euro-to-Dollar implied volatility for the same period reached its highest point since June this week.
On Wednesday, the U.S. Bureau of Labor Statistics released the latest inflation data with the Consumer Price Index (CPI) for October showing a year-over-year increase of 2.6%, slightly higher than before but still in line with market expectations.
In October, the Consumer Price Index rose by 0.2%, bringing the annual inflation rate to 2.6%, as expected by Wall Street. After excluding the more volatile food and energy prices, the core inflation rate rose by 0.3%, a 3.3% increase year-over-year, also matching market expectations.
In various categories, energy prices in October remained unchanged from the previous month, while food prices increased by 0.2% month-over-month. Compared to the same period last year, energy prices fell by 4.9% and food prices rose by 2.1%.
Housing prices remain a key factor driving the Consumer Price Index higher. The housing index, which accounts for one-third of the CPI’s weight, rose by 0.4% in October, double the increase in September, with an annual increase of 4.9%, accounting for more than half of all CPI index gains. In addition, the prices of used cars, automobile insurance, and airline tickets increased year-over-year to varying degrees.
According to another report from the Bureau of Labor Statistics, after adjusting for inflation, average hourly wages rose by 0.1% month-over-month, up 1.4% from the same period last year. Following the data release, U.S. stock futures edged higher, while bond yields fell slightly. Expectations in the market for the Fed to continue cutting rates in December also increased.
With Trump’s re-election, the U.S. stock market surged instantaneously and was booming, but the real estate market remains cold. This week, 30-year mortgage rates continued to rise slightly, and mortgage applications remained stagnant.
Despite the Fed cutting interest rates again last week by 25 basis points, its positive impact on the housing market is not significant. According to the latest data from the Mortgage Bankers Association (MBA), the 30-year fixed-rate mortgage increased slightly from last week to 6.86%, up from 6.81%; and mortgage applications increased modestly by 0.5% last week.
Real estate website Redfin conducted a survey before the election, which showed that nearly a quarter of potential first-time homebuyers indicated they would wait until after the election to assess economic trends before deciding on purchasing a home. With mortgage rates and home prices continuing to rise, the subdued atmosphere in the U.S. housing market may persist for some time.
Prior to the Fed’s rate cut in September, many expected U.S. mortgage rates to gradually decline as the Fed cut rates, thereby guiding the housing market to recover. However, with the dust settling on the election and the Fed cutting rates twice, mortgage rates have not fallen but instead continued to rise, causing hopes for a housing market recovery to once again become distant.
Just a day after Trump’s election, the Fed announced another 25-basis point rate cut, lowering the bank lending cost to 4.5% to 4.75%.
Fed Chair Powell said, “We are committed to maintaining economic strength by supporting maximum employment and returning inflation to the 2% target.”
While Fed rate cuts would lower credit card, auto loan, and other debt rates, mortgage rates have risen against the trend.
Chief Economist of the National Association of Realtors Lawrence Yun mentioned, “Mortgage rates are at their highest levels in 20 years.”
Why aren’t mortgage rates falling in sync with Fed rate cuts as expected by the market? First, mortgage rates are not directly tied to the federal funds rate but instead are predicted based on rate actions by the Fed. Additionally, mortgage rates typically move in line with 10-year U.S. Treasury bond rates.
After Trump’s re-election, U.S. bond rates saw a new wave of increases, with the 10-year bond rate reaching a seven-month high of 4.44%. This rise in bond rates led mortgage rates to increase accordingly, which was not necessarily unexpected. Furthermore, the strong performance of the U.S. economy and market concerns about future government fiscal deficits have contributed to the rise in mortgage rates.
Lawrence Yun, Chief Economist of the National Association of Realtors, had stated prior to the election that regardless of who won – whether Trump or Biden – the U.S. would face huge budget deficits, with the government continuing to borrow, resulting in less mortgage funds available for the housing market, hindering further rate decreases.
Apart from mortgage rates remaining stubbornly high, housing prices in the U.S. continue to skyrocket. Coupled with a shortage of housing inventory, these factors make it challenging for the real estate market to recover. The reduction in the number of homes on the market inevitably leads to increased competition and price increases.
Last month, the median house price in the U.S. was $418,700, a 3.1% increase from the same period last year.
Lawrence Yun, Chief Economist of the National Association of Realtors, noted, “House prices have been setting new records every month, solely due to our lack of housing inventory.”
With both housing prices and mortgage rates soaring, potential first-time homebuyers have been significantly impacted. Data shows that only 24% of home transactions last month were from first-time homebuyers. Analysts had previously optimistically predicted that U.S. mortgage rates would drop to around 4% over the next year, but it now appears that this goal may be challenging to achieve.
Lawrence Yun, Chief Economist of the National Association of Realtors, added, “I believe the new normal for mortgage rates could be close to around 6%.”
Now, let’s move on to a lighter topic. Last month, many people in North America, including New York, witnessed a rare and spectacular aurora borealis, but many also missed this fabulous moment. Not to worry, there will be plenty of opportunities to see the Northern Lights in the coming months if you plan your aurora watching trip ahead of time.
No one can deny that the dazzling and colorful Northern Lights are one of the most spectacular natural phenomena on Earth. Since the Northern Lights graced large areas of North America last month, enthusiasm for witnessing this spectacle has surged. The good news is that from now until early 2026, there will be many great opportunities to see the Northern Lights.
Travel expert Melanie Fish from Expedia shared, “We are going to see the most beautiful Northern Lights display in decades.”
According to the vacation rental company VRBO’s recent travel trend list, watching the Northern Lights topped the list of travel destinations, with as many as 61% of travelers hoping to see the Northern Lights in 2025.
Melanie Fish from Expedia said, “The demand for trips to view the Northern Lights is truly astonishing.”
The Northern Lights are a natural phenomenon caused by solar activity. When solar activity increases and larger, more frequent solar storms occur, the beautiful auroras appear in the skies over the north and south poles. This is happening right now, making it a golden opportunity to witness the Northern Lights.
While many New Yorkers were lucky enough to see the auroras in the sky last month, such opportunities are like a flash in the pan. In the U.S., the best place to truly witness the Northern Lights is in Alaska. However, planning a trip to see the Northern Lights is not as simple as just buying a ticket to Alaska; there are a few things to consider.
First, the further north you go, the better your chances of seeing the Northern Lights.
Second, the smaller the moon, the better your chances of seeing the Northern Lights. Therefore, consider booking your ticket according to the Chinese almanac for optimal visibility.
Third, keep an eye on the weather forecast and be prepared to cancel or change your plans at any time, as good or bad weather will determine if you can see the Northern Lights.
Lastly, wishing you the best in viewing the beautiful and dazzling Northern Lights!
On November 12th, Trump officially announced the invitation of Musk and Indian-American businessman Vivek Ramaswamy to lead the establishment of a new “Department of Government Efficiency.” The department’s main mission is to “clear the way for dismantling bureaucratic organizations, reduce unnecessary regulatory rules and wasteful expenses, and restructure federal agencies.” According to Trump’s plan, this new “Department of Government Efficiency” will be tasked with cutting nearly a third of the original fiscal expenditures.
Musk subsequently tweeted, stating: “This will be a threat to bureaucracy.”
Trump referred to this appointment as the “Contemporary Manhattan Project.” The original “Manhattan Project” was the code name for the project that developed the atomic bomb.
Trump noted that the department will provide recommendations and guidance from outside the government. This means that the department will not be part of the government system but will work in partnership with the White House Office of Management and Budget to drive structural reform of large government departments and develop an exceptionally efficient, entrepreneurial government.
In the 2016 election, Trump proposed to “drain the swamp” of Washington, partly referring to the massive civil service system. In a campaign rally in March 2023, Trump further proposed an “F Plan,” aimed at redefining the classification of federal civil servants, with some employees losing their job protections and becoming freelance employees, making it easier to lay them off, reduce the number of civil servants, and increase work efficiency.
The English name for the “Department of Government Efficiency” is the DOGE, which is also the name of the Musk-backed cryptocurrency “Dogecoin,” as well as the name of a dog character in the animated show “Homestar Runner,” also meaning “ridiculous” in English. Interesting, indeed!
Just after Trump announced Musk as the head of the Department of Government Efficiency, the market value of Dogecoin reached over $200 million, setting a new record high with a surge of over 33.4% within 24 hours.
In his statement, Trump refers to the two appointees as “the Great Elon Musk” and “American Patriot Vivek Ramaswamy.”
The election surely was a momentous one for Musk. It can even be said that without Musk’s strong support, the probability of Trump’s success would have been diminished. However, Musk made it clear from the beginning that he would not be joining the cabinet in the future. It was he who proposed the idea of creating a “Department of Government Efficiency,” which Trump wholeheartedly endorsed. Moreover, the newly established Department of Government Efficiency doesn’t clash much with traditional government departments, making it indeed suitable for Musk.
After the appointment was officially announced, Musk replied on the X platform, saying: “People have yet to realize how significant this will be.”
In terms of cost-cutting measures, Musk has had many business practices. In 2022, after acquiring Twitter, at least 8 rounds of layoffs were carried out, resulting in over 3,700 employees being laid off, with a 50% layoff rate.
By 2023, Musk had cut the original staff figure by 80%, from around 8,000 to just over 1,500, roughly achieving a balance.
Looking at Tesla, in 2019, Tesla laid off 7% of its staff, about 3,000 people; in 2022, Tesla cut another 10% of its full-time employees; in 2024, Tesla laid off over 10%, or about 14,000 people.
In 2016, SolarCity, the U.S. solar power company acquired by Musk, also underwent significant layoffs twice.
With the U.S. facing a staggering $1.8 trillion fiscal deficit, the Trump administration is poised to address the issue. Thus, enhancing government efficiency and reducing government spending are essential steps to alleviate the American government’s deficits.
According to data released by the U.S. Treasury Department, the federal government’s fiscal deficit for fiscal year 2024 has reached $1.83 trillion, expanding by over 8.1% from the previous fiscal year’s $1.7 trillion.
During his campaign, Trump mentioned stimulating economic growth through tax cuts and deregulation, which may result in a short-term reduction in federal tax revenues. As a result, the U.S. fiscal deficit may face further expansion risks.
On October 30, in an interview, the host asked Musk: How much do you think we can save from the Biden administration’s wasted $6.5 trillion budget? Musk responded, saying: At least $2 trillion.
On the same day, at a campaign rally, Trump said the first task of the newly established Department of Government Efficiency would be to develop an action plan within six months to