Bitcoin: Digital Gold in a World of Political Uncertainty? - CNBC

Bitcoin: Digital Gold in a World of Political Uncertainty? - CNBC

The Dow Jones Industrial Average closed at an all-time high after former President Donald Trump survived an assassination attempt. The S&P 500 hit an intraday high and the Nasdaq Composite rose 0.4%. The prospect of Trump's reelection is seen as a positive for small caps, with the Russell 2000 gaining 1.8%, touching its highest level since 2022 and recording a fourth straight positive day.

Trump Lauded at RNC

Former President Donald Trump was cheered and celebrated at the Republican National Convention in Milwaukee. Sporting a bandage over his right ear, Trump appeared in good spirits. The crowd erupted in cheers and chants of "Fight! Fight! Fight!" as he entered the arena and waved to the audience. Earlier, Trump chose Senator JD Vance of Ohio as his vice presidential running mate for the 2024 election. Meanwhile, Elon Musk has reportedly said he is planning to pledge about $45 million a month to a newly formed super PAC supporting Trump. 

Fed May Not Wait

Federal Reserve Chair Jerome Powell said the central bank will not wait until inflation reaches its 2% target to cut interest rates. Due to the delayed effects of monetary policy, "if you wait until inflation gets all the way down to 2%, you've probably waited too long, because the tightening that you're doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%."

Bitcoin 'Digital Gold'

BlackRock CEO Larry Fink, initially a bitcoin skeptic, now sees the cryptocurrency as "digital gold" and a potential safe haven for investors concerned about political instability and rising government debt. Fink believes bitcoin can offer uncorrelated returns and act as a hedge against currency debasement caused by excessive deficits. "I believe it is an instrument that you invest in when you're more frightened though. It is an instrument for when you believe countries are debasing their currencies by excess deficits, and some countries are," Fink told CNBC's "Squawk on the Street."

Asia Markets Mixed

The Asia-Pacific markets were mixed as investors weighed Powell's dovish comments and former President Donald Trump's choice for vice-presidential running mate, JD Vance, who has been critical of China. Hong Kong's Hang Seng index dropped 1.37%, while mainland China's CSI 300 rose 0.21%. India's benchmark Nifty 50 hit an all-time high, Japan's Nikkei 225 rose as markets resumed trading after a public holiday, and South Korea's Kospi inched higher. Australia's S&P/ASX 200 fell marginally, retreating from the index's all-time closing high on Monday.

Trump Trade

Financial markets are largely behind the Trump trade. "The market, I mean, will prefer Trump. He's more free market, he's antiregulatory, for growth," Wharton School finance professor Jeremy Siegel told CNBC's "Squawk Box" on Monday. But that growth comes at a price. "On growth, if we have a red sweep, I think its more likely that we're going to have more tax cuts — more than the 2017 tax cuts extended after the current expiration in late 2025. So that would certainly be a relative benefit for growth, albeit with higher deficits," Michael Feroli, JPMorgan chief U.S. economist, told CNBC.

Goldman Sachs suggests a Trump second term could sustain the recent small-cap rally. The Russell 2000 gained 6% last week and 1.8% on Monday. "The big wild card, on trade and immigration policy, there are a lot of unknowns, and if you go back to 2019, the first trade war, it did have a chilling effect on business sentiment and maybe some of that can be offset by deregulation," Feroli said. "We really are entering an environment of pervasive uncertainty if you look at policy next year."

Christopher Harvey, head of equity strategy at Wells Fargo Securities, told CNBC, "As the polls go up for Trump, you get a little bit more certainty, yes we can argue whether we are going to have tariffs or not have tariffs, but the probability of Trump that's been good for the market. So that certainty is a small positive and that's why you have seen the market go up."

"Regulation is coming down, who is that good for? That's good for the banks, that's good for the capital markets, M&A, IPOs and that's where I think you can make money in this market."— CNBC's MacKenzie Sigalos, Alex Harring, Yun Li, Hugh Son, Sarah Min, April Roach, Jesse Pound, Charmaine Jacob, Rebecca Picciotto and Amala Balakrishner contributed to this report.