Stocks and bitcoin rise after Trump’s victory as inflation concerns grow

NEW YORK (AP) — The U.S. stock market, Elon Musk’s Teslabanks and bitcoin are all set to rise on Wednesday as investors bet on what Donald Trump’s return to the White House will mean for the economy and world. Among the losers the market sees: the Mexican peso, solar companies and possibly anyone else to worry about higher inflation.

The S&P 500 rose 1.8% in morning trading and is on track to top that all-time high last month. The Dow Jones Industrial Average rose 1,315 points, or 3.1%, as of 10:10 a.m. Eastern time, while the Nasdaq composite was 2.1% higher.

The US stock market has historically tended to rise regardless of which side wins the White House, where Democrats have averaged bigger gains since 1945. But beneath the surface, Republican control could mean big shifts in the winners and losers, and investors are adding to their previously made expectations about what the higher rates, lower tax rates and lighter regulations what Trump favors will mean.

“Markets are struggling to figure out what will happen next, but for now the market is pricing in higher growth and higher inflation prospects,” said Peter Esho of Esho Capital.

Of course, how much change Trump will be able to effect will likely depend on whether his fellow Republicans win control of Congress. yet to be determined. That could leave room for a pullback in some of Wednesday’s big shock moves. On Wednesday morning alone, the S&P 500 vacillated between gains of 2.1% and 1.4%.

Nevertheless, after Trump’s dramatic victory, the market is divided between fairly clear winners and losers. Among them:

BANK STOCKS, up

Bank stocks led the market higher, partly on hopes that a stronger economy would mean more customers would get loans and pay them back with interest. They also hoped for lighter regulation from a Republican White House, which could lead to more mergers and acquisitions where investment banks could earn fees. JPMorgan Chase rose 8.3%, and the 4.5% jump for financial stocks in the S&P 500 was by far the biggest gain among the index’s eleven sectors.

CRYPTO, op

Trump has promised to make the country ‘the crypto capital of the planet” and create a “strategic reserve” of bitcoin. The price of bitcoin hit an all-time high of over $75,000, according to Coindesk, and was recently up 6% to just over $74,000. Companies in the crypto industry also jumped, including trading platform Coinbase’s 17% jump.

TESLA, op

Musk has become a close ally of Trump and is egging on the former president. While Trump could ultimately hurt the electric car industry broadly by withdrawing government subsidies, analysts say Tesla could gain somewhat of an advantage by already being such a big player in an industry. Tesla rose 11.8%, while rival Rivian Automotive fell 6.4%.

TRUMP MEDIA & TECHNOLOGY GROUP, op

The company behind Trump’s Truth Social platform increased by 10.5%. It regularly trades more on Trump’s popularity than on profit prospects. The increase came even after it filed unaudited financial documents with regulators late Tuesday, saying it had lost $19.2 million in the latest quarter and that sales had weakened from a year earlier.

PRICES FOR TREASURY BONDS, DOWN

Investors see that Trump’s policies could potentially lead to stronger economic growth, which will push down government bond prices and raise yields. Tax cuts under Trump could also drive up the US government’s budget deficit, increasing borrowing needs and driving interest rates up even further. The yield on the 10-year government bond rose to 4.45% from 4.29% late Tuesday, an important step for the bond market. It has increased significantly from August, when it was below 4%.

INFLATION CONCERNS, up

Investors also see that Trump’s policies are likely to contribute to future inflation, which will also cause government bond yields to rise.

“Trump continues to openly tell people that he will raise tariffs not just on China, but on all trading partners,” said Andrzej Skiba, head of BlueBay US Fixed Income at RBC Global Asset Management. “We are talking about 10% tariffs for all global partners. This is a big problem because it could increase inflation by 1%. If you add 1% to the inflation figures next year, we will have to say goodbye to interest rate cuts.”

Much of Wall Street’s record attempt this year was based on expectations upcoming interest rate cuts by the Federal Reservenow inflation appears to be back to the 2% target. A more flexible interest rate helps stimulate the economy, but can also give more fuel to inflation.

The Fed will announce its latest interest rate decision on Thursday, with a cut still expected, according to data from CME Group. But traders have already lowered their expectations about the number of cuts the Fed will implement by the middle of next year.

FOREIGN CURRENCY, fallen against the dollar

Trump has pledged to sharply raise tariffs on imports from China, Mexico and other countries, making the outlook for Chinese exporters bleaker at a time when Beijing has relied heavily on ramping up production in an effort to revive its slowing economy to blow. The value of the Mexican peso fell another 1.6% against the dollar.

RENEWABLE ENERGY STOCKS, down

Trump is a fan of fossil fuels and encourages the production of oil and natural gas. His victory sent solar stocks sharply lower, including a 12.4% decline for First Solar and a 14.2% decline for Enphase Energy.

Originally published: November 6, 2024 at 12:40 AM PST