Stocks surged to record highs, the dollar strengthened by the most in years and government bond yields soared on Wednesday, following a conclusive win by President-elect Donald J. Trump.
In part, the reaction is typical following a presidential election, with a spate of activity as the outcome of the vote becomes clear, putting an end to months of uncertainty. But analysts and investors noted that the reaction looked stronger than just relief, with traders preparing for more government spending, lighter regulation, bigger deficits and accelerating growth under a Trump administration and at least partial Republican control of Congress.
“What we are seeing is a visceral reaction to a surprising outcome given very tight polling,” said Kristina Hooper, chief global market strategist at Invesco. “Markets are reacting positively to a decisive victory.”
U.S. stock markets had risen steadily overnight as the votes were counted and shot higher at the open of trading on Wednesday. The S&P 500 rose more than 2 percent, as did the tech-heavy Nasdaq Composite index. The Dow lurched 3 percent higher. The Russell 2000, which tracks smaller companies considered to be more sensitive to the fate of the economy, jumped almost 5 percent, it’s biggest one day rise in roughly a year.
All four indexes were on course to notch record highs by the end of the day.
Bitcoin rose sharply, also hitting a record. Mr. Trump has promised to end the Biden administration’s regulatory push against cryptocurrency and establish the United States as the “crypto capital of the planet.”
The U.S. dollar rose against the currencies of major trading partners — like the Japanese yen as well as the euro, the Mexican peso and the Chinese yuan — which were expected to be heavily affected by Mr. Trump’s proposal to substantially raise tariffs. The euro recorded its steepest daily fall against the dollar in more than eight years.
In October, investors began to drive up yields and push the dollar higher as they started to see a better chance of a Republican victory. Mr. Trump’s proposed policies on taxes, trade and immigration might bolster economic growth, raise inflation and increase government spending. Together, analysts believe, the result will be higher interest rates over time.
The 10-year Treasury yield jumped 0.2 percentage points on Wednesday — a big move in that market and its biggest in more than two years — to more than 4.4 percent.
The market moves highlight the challenge now facing officials at the Federal Reserve, who are widely expected to cut interest rates when they meet on Thursday. Mr. Trump’s policies are set to juice the economy, just as the Fed appears to have slowed it down enough to tame inflation, worrying some investors.
A market measure of 10-year inflation expectations rose by a tenth of a percentage point on Wednesday, to 2.4 percent, its biggest one-day increase since early 2023. Fed officials aim to keep inflation at 2 percent over time.
“Any way you slice and dice it, we think inflation risks are now higher,” said Calvin Tse, head of Americas macro strategy at BNP Paribas.
Whether the stock market rally will endure is “dependent on what the Fed has to say tomorrow,” said Steve Sosnick, the chief strategist at Interactive Brokers. “If bonds really freak out, I think it’s hard for the stock market to go too far. If bonds calm down, then the rally can continue.”
Global Investors React
Investment advisers in Asia and Europe described a lengthy day and night spent fielding calls from clients as the election results rolled in, discussing the potential implications of Mr. Trump’s victory.
“We are all waiting to see if his second term will be the same or different,” said Joy Yang, the head of Asian economic and strategy research at the hedge fund Point72. “The broad market consensus — there is very little understanding of what his plans are this time.”
Stock markets in Europe rose sharply in early trading on Wednesday but pared those gains in the afternoon, ending with a small loss.
Yields on European government bonds fluctuated. Investors’ initial bets that central banks would cut rates more to bolster the region’s economies, especially those of export-oriented nations such as Germany, gave way to the prospects of higher inflation from weaker currencies. “The market has clearly yet to settle on a consensus narrative,” analysts at Rabobank said.
But there were some early losers in European markets as shares in the German automakers BMW and Daimler as well as the Danish renewable energy company Orsted dropped on expectations of higher tariffs and less aggressive climate goals.
German business leaders warned that a second Trump term would further challenge the country’s stagnating economy. The United States is the largest buyer of German products, especially pharmaceuticals, machinery and cars.
“The clear result of the U.S. elections is a wake-up call for Germany and Europe,” said Siegfried Russwurm, president of the Federation of German Industries.
Across Asia, stock markets extended gains from Tuesday. In Japan, the benchmark Nikkei 225 rose 2.6 percent. Stocks in mainland China fell slightly, and Hang Seng Index in Hong Kong tumbled 2.2 percent.
Bruce Pang, chief economist for the greater China area at JLL, a real estate and investment management firm, said the Hong Kong stocks were down because the companies listed there were more exposed to a weaker Chinese currency.
Mr. Trump’s more protectionist policies might also mean that Chinese policymakers will focus more on driving domestic demand in the economy instead of expecting exports to stimulate growth.
“There will be tensions geopolitically, but it’s still more predictable,” Mr. Pang said of a Trump victory. “There is some history there.”
The ‘Trump Trades’
In the volatile cryptocurrency markets, Bitcoin rose 6 percent over the past 24 hours to more than $74,000, eclipsing a record set in March. Mr. Trump had promoted himself as a crypto supporter on the campaign trail, and crypto lobbyists spent over $130 million in a largely successful effort to elect congressional candidates supportive of their industry.
This year, uncertainty over the election’s outcome and fears of a contested result has driven money into gold, which is considered a safe-haven investment during turbulent times. But with Mr. Trump’s victory, gold prices, which have been near a record high, fell.
The stock of Tesla, the electric vehicle company run by Elon Musk, who has emerged as one of Mr. Trump’s most prominent backers, rose more than 10 percent. Mr. Trump could ease regulatory scrutiny of Tesla. He has promised to install Mr. Musk as head of a “government efficiency” panel.
Shares in the private prison companies Geo Group and CoreCivic rose more than 30 percent. Private equity companies also performed well on hopes of more deal making and looser regulations.
More broadly, sectors that stand to benefit from economic growth, such as finance and energy, saw the biggest gains after Mr. Trump’s win. JPMorgan Chase, the nation’s largest bank, gained more than 10 percent, its best day in years.
The stocks that recorded losses, on the other hand, were largely in defensive sectors like real estate and utilities, which tend to be more sensitive to interest rates.
But no stock is more directly linked to Mr. Trump’s political fate than Trump Media & Technology Group, the parent company of Truth Social. Mr. Trump is the social network’s most important user and its largest shareholder. The company’s shares have traded largely as a proxy for Mr. Trump’s political fortunes.
Trump Media’s stock price swung wildly, on heavy volume, rising 30 percent at one point before settling at a gain of 8 percent.
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