US Stocks, Dollar Rally as Trump Wins US Election: Markets Wrap

(Bloomberg) — Donald Trump’s victory in the US presidential election rippled through global markets on Wednesday, with US stock futures rallying, Treasury yields jumping and the dollar surging the most since 2022.

S&P 500 futures climbed 2.3%, 10-year yields rose 15 basis points to a four-month high of 4.42% and Bitcoin spiked to a record. Trump won the race for the White House after network projections showed he took the battleground states of Wisconsin, Pennsylvania and Georgia, and Republicans gained control of the US Senate. 

The Bloomberg Dollar Spot Index was up 1.3%. The Mexican peso fell the most in three months and the euro led losses among Group-of-10 currencies. Contracts on the Russell 2000 Index added 6.1%. Smaller companies with typically domestic operations are seen as gainers given the Republican party’s protectionist stance. 

Tesla Inc. surged 15% in premarket trading while Trump Media & Technology Group Corp. jumped more than 25%. The biggest US lenders, including JPMorgan Chase & Co. and Bank of America Corp., advanced on expectations of a looser regulatory backdrop.

Hong Kong shares and the yuan weakened as investors factored in an increase in trade tensions. Eastern European currencies posted some of the biggest losses on speculation that the region may have to increase defense spending. Ukraine’s dollar-denominated sovereign bonds jumped.

A cohort of investors on Wall Street have wagered that Trump’s stance on industrial policy, corporate tax cuts and tariffs would boost stocks and could fuel inflation — spurring bond yields and the US dollar higher. Crypto is seen as benefiting from relaxed regulation and Trump’s public support for the digital currency.

“When I came in this morning, it was obvious many assets had decided Trump had already won,” said Luke Hickmore, investment director at Abrdn. “We might hit 5% on the US 10-year yield. Maybe even this year. People will realize inflation is going to rise as he pushes hard on the fiscal side.”

Wall Street saw the potential for outsized moves. 

Goldman Sachs Group Inc.’s trading desk said a Republican sweep may push the S&P 500 up by 3%, while moves would be half as much in the event of a divided government. A Morgan Stanley note said risk-taking appetite may dip in the event of a Republican sweep as fiscal concerns fuel yields, but if bond markets take it in their stride the likes of growth-sensitive cyclical stocks would rise.

Here’s What Wall Street Says:

• Justin Onuekwusi at St. James’s Place

There is potential for higher short-term volatility in bond markets in the aftermath of the election. We think this is particularly likely around US Treasuries as sentiment adjusts to the result. 

Possible higher inflation may also cause yields for long-term bonds to rise higher than short-term bonds. This is sometimes seen as a signal for the start of a strong economic period but can also indicate a time of higher interest rates.

• Charlotte Daughtrey at Federated Hermes

Trump’s “proposed tariffs may be reflationary. This may impact the pace of rate cuts or perhaps push them back into a rate hiking cycle, something they are keen to avoid.”

• Mohit Kumar at Jefferies

We see a continuation of the US equities rally. Our view has been that a number of investors are sitting on the sidelines and waiting for election uncertainty to be out of the way. 

Assuming a clean election result, with Trump policies largely considered positive for the market, a growth picture that is doing fine and a Fed that is ready to cut rates, we see further upside in US equities. We also expect US equities to continue to outperform Europe and global indexes.

• Samy Chaar at Lombard Odier

The race for the House of Representatives will determine whether campaign pledges can be fully implemented. The question of tariffs is key for global trade and the Fed’s easing prospects.

• James Demmert at Main Street Research:

Investors should look past the election and focus on the fundamentals of what drives markets. The economy and earnings continue to be better than expected, most stocks are reasonably priced and the Fed is in an accommodative mode and is expected to cut interest rates again this week. There is an excellent backdrop for stocks right now.

Key events this week:

• China trade, forex reserves, Thursday
• UK BOE rate decision, Thursday
• US Fed rate decision, Thursday
• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 2.3% as of 5:35 a.m. New York time
• Nasdaq 100 futures rose 1.8%
• Futures on the Dow Jones Industrial Average rose 2.9%
• The Stoxx Europe 600 rose 1.5%
• The MSCI World Index was little changed
• E-Mini Russ 2000 Dec24 rose 6.1%

Currencies

• The Bloomberg Dollar Spot Index rose 1.3%
• The euro fell 1.6% to $1.0751
• The British pound fell 1.1% to $1.2896
• The Japanese yen fell 1.5% to 153.96 per dollar

Cryptocurrencies

• Bitcoin rose 6.7% to $73,769.37
• Ether rose 8.5% to $2,620.55

Bonds

• The yield on 10-year Treasuries advanced 15 basis points to 4.42%
• Germany’s 10-year yield declined four basis points to 2.38%
• Britain’s 10-year yield declined three basis points to 4.50%

Commodities

• West Texas Intermediate crude fell 1.6% to $70.85 a barrel
• Spot gold fell 0.6% to $2,726.25 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Cecile Gutscher, Kit Rees and Margaryta Kirakosian.

©2024 Bloomberg L.P.