The Trump trades may still have some room to continue, but keep an eye on rising yields

Investors entered election night watching a dead heat in the race between former President Donald Trump and Vice President Kamala Harris. With the Republican candidate exceeding expectations, winning the swing state of North Carolina and appearing on track to further narrow Harris’ path to victory, traders have expanded their so-called Trump trades, said Keith Lerner, chief market strategist at Truist.

That means profits for small caps and crypto, while interest rates rise and China underperforms. Looking back at Trump’s 2016 victory, interest rates have continued to rise after the election, along with stock markets. Small caps rose about 15% and outperformed large caps by about 10% in about the next month after the election, while 10-year yields rose about 60 basis points, Lerner told MarketWatch.

“I do think that higher interest rates will ultimately be a point of tension for small caps outside of the short-term population. And while Fed Funds futures are still pricing in about a 95% chance of a rate cut this week, December has shifted. down,” he said. “And there is still uncertainty about Trump’s policies and tariffs, which will cause more volatility in the markets.”