Despite strong financial liquidity, Trump’s potential tariff policies could disrupt markets. A strong US dollar may prompt foreign central banks to sell US assets to defend their currencies. This could increase long-term Treasury yields (TNX), reduce liquidity, and pressure stocks and bonds. While the S&P 500 may initially rise due to strong liquidity, higher Treasury yields could act as a headwind in 2025.
This financial liquidity will likely impact commodities and digital assets. Gold is trading near record levels while the oil market continues to experience intense volatility. Additionally, Bitcoin reached a record high of approximately $109,300 before retracing to $103,000. Support of around $100,000 in Bitcoin would confirm strong liquidity in the financial markets.
The strong volatility in Bitcoin is confirmed by the significant resistance at the 2-year trendline around $110,000 and the formation of an ascending broadening wedge pattern at this resistance level, as shown in the chart below.
