‘Trump trade’ takes off as investors bet on his return to the White House

• The markets are moving based on the American election results, which strongly point to a victory for Donald Trump.

• Shares of Trump Media rose as much as 62% in premarket trading, and bitcoin hit an all-time high.

• Treasury yields and the dollar have risen due to Trump’s proposed tariffs, deportations and other policies.

Investors are rushing into the Trump trade now that a second Donald Trump presidency seems almost certain.

Barring any setbacks, Trump will achieve the 270-vote majority in the Electoral College needed to win.

“The so-called ‘Trump trade’ is in full swing this morning,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said in a note.

“US interest rates are rising due to expectations that debt levels will rise further under the presidency of Donald Trump. Bitcoin has reached a new all-time high. In traditional currency markets, the US dollar is rising against most major currencies.”

Even before Trump emerged as the likely winner early Wednesday morning, a strong showing after the polls closed resulted in the Trump trade – which has depended for months on the former president’s election chances – is gaining momentum.

At the center of the trade are Trump’s plans for a near-universal tariff — which would likely accelerate inflation — and mass deportations.

Here’s a look at how the markets are moving in response to Trump’s apparent victory:

Stock futures moved higher

Supporters of Trump’s proposed tax and regulatory policies see them as pro-business moves that would boost corporate profits and deal activity.

S&P 500 futures rose by 2.2%, while Dow Jones Industrial Average Futures reached record highs, rising 2.8% and Nasdaq 100 Futures rose by 1.7%.

“Equity markets are looking so far on the clarity of Trump’s victory this morning and futures are pointing to a strong open,” Neil Wilson, chief market analyst at Finalto, said in a morning note.

Traders’ positive response also reflected their broader optimism about the US economy.

“Economic growth remains strong, third-quarter earnings growth has been solid and the strong Fed put continues to support sentiment,” said Pepperstone’s Brown.

“With electoral uncertainty removed, the path is clear for further gains to lead the market into the end of the year,” Brown added.

European shares followed the lead of US futures, with the UK benchmark FTSE 100 up 1.3% at 9:30 a.m. local time (4:30 a.m. ET). In Germany, the DAX rose 1.4%, while the French CAC40 rose 1.7% in morning trading.

Trump Media and Tesla win

Trump Media and Technology Group Shares rose as much as 62% to $55 in premarket trading and were up 33% at last check. The share has enjoyed it a meme-like rally in recent weeks as the former president strengthened his position in the betting markets and in the polls.

Traders boosted other stocks expected to benefit from a second Trump term, sending Elon Musk’s Tesla up 12% and crypto companies MicroStrategy and Coinbase up 13% and 12%, respectively.

The interest rate on government bonds is significantly higher

The benchmark Interest on 10-year government bonds rose by 13 basis points to 4.41%, the highest level since early July. The two-year yield – the interest rate most immediately sensitive to changes in the Fed’s monetary policy – ​​rose 6 basis points to 4.25%.

A Trump victory is seen as an inflation eventwhich would fuel higher prices and wage growth.

Investors have been pricing in higher rates for weeks, believing Trump’s policies would make it difficult for the Fed to cut rates further, especially if inflation soars.

The strong reaction in the Treasury market “suggests that bond investors are putting the election outcome and the economic fallout of a Trump victory ahead of the Federal Reserve, even as the Fed is expected to cut rates and implement a rate cut this week.” cutting cycle for the following year,” said Kathleen Brooks, director of research at XTB, in a morning note.

The US dollar soared

The Bloomberg Dollar Spot Index rose 1.3% after gaining as much as 1.7% – the highest level in four years. The dollar rose against every G10 currency, including a 1.5% gain against both the euro and yen.

The dollar also rose 2.2% against the Mexican peso. The currency cross is seen as an indicator of Trump’s election chances, given his stated desire to bring 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 current easing efforts. These rising rates would then support further appreciation of the dollar.

“The election outcome reinforces the USD’s existing bull case, with US economic growth set to continue to outperform its peers for the foreseeable future, and participants not particularly alarmed by the rapid pace of policy normalization by the Fed,” said Michael Brown, senior research strategist at Pepperstone. said in a morning note.

Small-cap stocks spiked

Futures on the small-cap Russell 2000 index rose 5.9% as of 4:14 a.m. in New York. They are believed to be receiving an outsized boost from Trump’s protectionist policies as they tend to engage in more domestic activities.

Bitcoin reached an all-time high

The cryptocurrency reached a new high above $75,000 before retreating to around $73,000. A Trump victory is seen as bullish for bitcoin and the broader cryptocurrency industry, as Trump has done digital assets are firmly embraced in recent years.

“For many, bitcoin is a hedge against currency devaluation and inflation because it operates outside the traditional constraints of monetary policy,” Naeem Aslam, chief investment officer at Zaye Capital Markets, said in a morning note.

“With Trump’s victory, conditions could be right for Bitcoin’s price to rise further as investors look for alternatives to the dollar,” he added.

Volatility decreases

The CBOE Volatility Index, which measures expected stock market volatility over a rolling 30-day period, fell sharply around 3 a.m. ET, shortly after it became clear that Trump was on his way to victory. The VIX fell more than 20%, likely reflecting investors welcoming a clear election outcome.

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