Traders believe Trump 2.0 will lead to inflation, start preparing for Fed shift

Traders believe that Trump 2.0 will lead to inflation, so they are betting that U.S. bond yields and the U.S. dollar will strengthen. But that trade has lost momentum in recent weeks as Democratic candidate Harris has changed the campaign landscape and eliminated Trump's advantage in the polls. The Bloomberg Dollar Spot Index has fallen nearly 2 percent so far in August as traders prepare for a Fed shift, the biggest drop since late last year when the market prematurely braced for a Fed shift. This time, however, Fed officials have made it clear that they are finally ready to begin making their first rate cuts of the cycle as inflation cools.