Investors are rallying around the “Trump trade” after Donald Trump secured a second term as U.S. president, crossing the 270-vote Electoral College threshold by winning Wisconsin early Wednesday morning.
“The ‘Trump trade’ is in full effect today,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “U.S. yields are climbing on expectations of expanded debt under another Trump term. Bitcoin hit a new high, and the U.S. dollar is surging against major currencies.”
Even before Trump’s win was confirmed, his strong election performance had intensified the Trump trade, with many investors betting on assets likely to benefit from his policies. Central to this trade are Trump’s plans for broad tariffs and possible mass deportations, which could raise inflationary pressure.
Here’s how markets are reacting to Trump’s apparent victory:
Stock Futures Climb
Stock futures rallied on anticipation of Trump’s business-friendly tax and regulatory policies, seen as supportive for corporate profits. S&P 500 futures rose 2.3%, the Dow Jones climbed 2.9%, and Nasdaq 100 futures gained 1.8%.
“Markets are responding positively to Trump’s win, showing signs of stability this morning,” said Neil Wilson, chief market analyst at Finalto. Investors seem buoyed by the clarity around Trump’s policies and confidence in economic growth, according to Michael Brown, senior research strategist at Pepperstone, who noted the optimism moving into year-end.
European stocks mirrored U.S. futures, with the UK’s FTSE 100 up 1.3%, Germany’s DAX up 1.3%, and France’s CAC40 rising 1.6%.
Gains for Trump Media and Tesla
Shares of Trump Media and Technology Group surged by up to 62% in premarket trading, settling up about 29%. Tesla rose 15%, and crypto-related companies like MicroStrategy and Coinbase each saw 13% gains.
Treasury Yields Rise
The benchmark 10-year Treasury yield spiked 15 basis points to 4.44%, its highest since July, with the two-year yield gaining six basis points to 4.25%. Investors expect Trump’s inflationary policies to keep pressure on rates, challenging the Fed’s ability to cut interest rates in the near term.
Kathleen Brooks, research director at XTB, noted that bond investors are focusing on Trump’s economic impact over Federal Reserve policy.
U.S. Dollar Soars
The Bloomberg Dollar Spot Index jumped 1.4%, its largest gain in four years, with the dollar climbing 1.5% against the euro and yen and 2.5% against the Mexican peso. Trump’s plans to repatriate manufacturing jobs to the U.S. could drive further dollar gains.
“The election bolsters the USD bull case, with U.S. growth projected to lead global peers,” said Brown of Pepperstone.
Small-Cap Stocks Surge
Russell 2000 index futures, which track small-cap stocks, rose 6.5%, as Trump’s protectionist stance is expected to benefit companies focused on domestic markets.
Bitcoin Reaches Record High
Bitcoin set a new high above $75,000 before dipping to around $73,000. Trump’s pro-crypto stance has strengthened support for digital assets, which are seen as hedges against currency devaluation and inflation.
“Bitcoin may continue its rise under Trump, as investors look for alternatives to the dollar,” stated Naeem Aslam, chief investment officer at Zaye Capital Markets.
Volatility Declines
The CBOE Volatility Index (VIX), a measure of expected stock market volatility, dropped by nearly 30% after Trump’s path to victory became clear. Investors appear relieved by the clear outcome, reducing short-term market uncertainty.
