The first day of Trump’s inauguration saw extreme market volatility, with a mix of expectations and uncertainties causing rapid price swings. This article reviews market movements on the day, compares them with past inaugurations, and examines the reasons behind these fluctuations. Additionally, we highlight the importance of using verification tools to analyze and prepare for such events.
1. Market Replay: January 20, 2025
The upper left chart shows USD/JPY, the lower left shows Bitcoin USD, the upper center shows Nikkei 225, the lower center shows S&P 500, the upper right shows Oil, and the lower right shows Gold. The replay starts from midnight in New York time, with Bitcoin already showing significant movement. The market is highly volatile, and a major move began around 8:30 AM (Japan time 10:00 PM). Both Nikkei 225 and S&P 500 were affected, leading to significant fluctuations.
Later, around 8:00 AM (Japan time 10:00 PM), another major fluctuation occurred. This was during the celebration when the president performed a signing ceremony, followed by a scene of signing numerous executive orders at the presidential office.
In a short period, USD/JPY rose by 120 pips, then dropped by 130 pips, Nikkei 225 increased by 450 yen, then fell by 550 yen, and S&P 500 also experienced a round trip of over 50 dollars. This movement saw Gold showing a correlated pattern but trending upwards. Although the specific executive orders signed were not disclosed, mentions of WHO withdrawal and tariff discussions were present, potentially causing investors to seek safe-haven assets like Gold.
Subsequently, USD/JPY formed an uptrend, while Nikkei 225 and S&P 500 stabilized, Oil declined, and Gold continued to rise. USD/JPY increased by around 130 pips, Gold rose by 30 dollars, and Nikkei 225 saw a 600-yen increase after previously declining by the same amount, ultimately returning to its original level. Oil dropped by 2.2 dollars, likely influenced by former President Trump’s “Drill, Baby, Drill” policy.
２．Comparison with Past January 20th Events
Next, let’s compare with past presidential inauguration days. We maximize the chart and switch to the 5-minute time frame. First, we observe the entire chart of January 20, 2025, marking the second term of President Trump.
Then, we look at January 20, 2021, the day President Biden took office. On this day, former President Trump lost the election, and Biden was inaugurated. The chart appears to show significant movement, but measurements reveal a mere 50-pip drop and a 30-pip rise, indicating much less volatility compared to this year. At the time, the market took a cautious stance towards the new administration, and investors were in a wait-and-see mode.
Next, let’s examine January 20, 2017, the first inauguration day of President Trump. Similar to this year, market volatility was high. The chart shows a decline of over 200 pips, further decreasing by 250 pips. However, this day was a Friday, meaning the market closed for the weekend, making it impossible to observe market reactions to the celebration event. Unlike the second term, the market followed a clear downtrend, suggesting uncertainties about Trump’s policies led to a weaker dollar.
3. Why Did the Market Move So Wildly?
Market turmoil may have been caused by investor anxiety. The market was a mix of expectations and uncertainties due to a series of policy announcements and the influence of algorithmic trading. The following hypotheses can be considered:
Series of Policy Announcements
On the first day of President Trump’s inauguration, numerous executive orders were signed one after another. Without detailed explanations, these sequential signings created uncertainty among investors, leading to increased market volatility. Expectations and concerns regarding critical policies such as tax cuts and deregulation contributed to market fluctuations.
Impact of Algorithmic Trading
Modern financial markets are heavily influenced by algorithmic trading. Especially during important policy announcements, algorithms execute trades automatically, amplifying market movements. On this day, algorithms reacted swiftly to various news updates, causing large fluctuations within short timeframes. Stop-loss orders were triggered, leading to further volatility. Algorithmic trading played a significant role in increasing short-term market swings.
Inauguration Day Uncertainty
The first day of Trump’s inauguration was filled with uncertainty for the market. Given his past statements and actions, expectations and anxieties about future policies were mixed, making it difficult for investors to navigate the market. The lack of clarity on Trump’s economic policies led to indecisiveness and short-term volatility. This situation had a significant psychological impact, particularly on risk-averse investors, further amplifying market instability.
4. Conclusion
Presidential inauguration days often bring significant market turbulence, with highly volatile price movements. Events like this year’s roller-coaster market may happen again in the next four years. With the increasing impact of algorithmic trading, short-term fluctuations are expected to continue, making vigilance essential.
Proprietary trader Mr. Aizawa has also mentioned the influence of AI trading patterns. There is no doubt that its impact is growing.
The Importance of Trade Verification Tools
To review past market movements like this, using verification tools is highly effective. Replaying historical charts can help identify areas for improvement and prepare for future market conditions.
Verification tools should include features such as fine forward and backward movement with keyboard controls, unlimited synchronized charts, the ability to view information with a mouse, instant verification capabilities, and smooth, stress-free operation. Even a simple synchronization tool can improve efficiency significantly.
Having such a tool is highly beneficial. Be sure to make good use of it!
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