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Markets are responding sharply to Donald Trump’s US election victory.
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US Treasury yields and the dollar are rising, while stock futures and cryptocurrencies are also seeing strong gains.
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Trump’s plans for a near-universal tariff and mass deportations, are expected to push inflation higher.
Investors are turning to the Trump trade after the former president clinched a US election victory.
Trump passed the 270-vote Electoral College majority after winning Wisconsin in the early hours of Wednesday.
The win has resulted in a continuation of the so-called Trump trade, which has for months hinged on the former president’s election odds. Central to the trade are Trump’s plans for a near-universal tariff and mass deportations, which would push inflation higher.
Here’s a rundown of how markets are moving in response to Trump’s climbing odds:
The benchmark 10-year Treasury yield climbed as much as 21 basis points to 4.48%, the highest since early July. The two-year yield — the most directly sensitive to Fed monetary-policy changes — gained nine basis points to reach 4.27%.
A Trump victory is viewed as an inflationary event, which would fuel higher prices and wage growth.
Investors have been pricing in higher yields for weeks on the view that Trump’s policies would make it hard for the Fed to lower rates much further, especially if inflation flares.
The Bloomberg Dollar Spot Index was up as much as 1.7%, the most in four years, hitting its highest level since November 2023. The greenback climbed against every G10 currency, including gains exceeding 1.7% against both the euro and yen.
The dollar also rose as much as 3.5% against the Mexican peso before paring gains. The currency cross has been seen as a bellwether of Trump’s election chances, given his expressed desire to “reshore” Mexican manufacturing back to the US.
The expected inflationary nature of Trump’s policies would likely push interest rates higher and could prompt the Fed to tighten monetary policy, reversing its current easing efforts. Those climbing rates would then underpin further dollar gains.
Supporters of Trump’s proposed tax and regulatory policies view them as pro-business moves that would boost corporate profits and deal activity.
The S&P 500, Dow Jones industrial average, and Nasdaq 100 climbed to fresh record highs.
Founder and CEO Elon Musk has been an outspoken Trump supporter. Shares of Tesla spiked as much as 15% on Wednesday on expectations the electric automaker will be a major beneficiary of Trump’s presidential return.
Trump Media and Technology Group shares rallied 35% at intraday highs before settling about 9% higher. The stock has seen a meme-like rally in recent weeks as the former president strengthened his position in betting markets and the polls.
Still, it’s a highly volatile stock, closing more than 10% higher or lower in five of the last six days. Last week it saw a three-day skid of 40% as Harris election odds surged on promising early polling.
The Russell 2000 index rose as much as 5.8%. Small-cap stocks are viewed as getting an outsize boost from Trump’s protectionist policies, since they generally have more domestic operations.
The cryptocurrency rose as much as 10% set a new high above $76,000 before retreating slightly. A Trump win is seen as bullish for bitcoin and the broader cryptocurrency industry, as Trump has firmly embraced digital assets in recent years.
“With Trump’s win, the conditions may be right for Bitcoin’s price to continue its ascent as investors seek alternatives to the dollar,” Naeem Aslam, chief investment officer at Zaye Capital Markets, said in a morning note.
The CBOE Volatility Index, which measures the forward 30-day expected volatility in the S&P 500 over a rolling 30-day period, dropped 20%. Wall Street’s so-called fear gauge generally trades inversely to the benchmark index, and the decline shows signs of calming nerves.
Read the original article on Business Insider
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