(Bloomberg) — A slew of trades around the world tied to Donald Trump’s anticipated presidential bid saw decisive moves, with stocks climbing higher, Treasury yields surging and the dollar rising the most since March 2020.
S&P 500 futures rose 1.3%, 10-year yields surged 18 basis points to a four-month high of 4.46%, and Bitcoin hit a record high. It’s a move that reflects increased betting on a Trump presidency and a victory for Vice President Kamala Harris. narrowing.
A group of investors on Wall Street have bet that Trump’s pro-growth stance on industrial policy, corporate tax cuts and tariffs could boost stocks and fuel inflation, fueling a rise in bond yields and the U.S. dollar. The Bloomberg Dollar Spot Index rose 1.5%. The Mexican peso fell 2.8%, while the Japanese yen and euro fell at least 1.6%.
Russell 2000 Index contracts added 2.4%. Small businesses that generally operate domestically are seen as potentially benefiting from a Republican victory, given the party’s protectionist stance. Trump Media & Technology Group Corp. saw a surge in trading on Robinhood Markets Inc.’s 24-hour platform. Japanese and Australian stock markets rose, while Hong Kong stocks fell. The rise in the value of the dollar has caused copper prices to fall, along with most metals. We ran out of oil.
Notable movements concentrated in a handful of assets seen as sensitive to Trump’s policy proposals included the dollar, which strengthened amid tariff hike plans, and bonds, which rose in part in anticipation of a spending plan that could expand the $1.8 trillion U.S. budget. It is the rate of return. shortage. Cryptocurrencies appear to be benefiting from relaxed regulations and Trump’s public support for digital currencies.
“We are seeing some of the recognized Trump trades such as penny stocks, cryptocurrencies, interest rates and even Trump Media on the rise right now,” said Truist’s Keith Lerner. “Still, we have a long way to go.”
In contrast to Tuesday’s relatively calm session, Wall Street saw the potential for a major move regardless of the election outcome. Goldman Sachs Group Inc.’s trading desk said the S&P 500 could rise 3% if Republicans win by a landslide, but a decline of the same magnitude is possible if Democrats win both the presidency and Congress. If the government is divided, the movement will be cut in half. Andrew Tyler of JPMorgan Securities said anything other than a Democratic presidential landslide victory is likely to cause stocks to rise.
Morgan Stanley said that because finances affect fuel yields, a Republican presidential election may reduce risk-taking appetite, but if the bond market accepts this, growth-sensitive cyclical stocks and other stocks will rise. Meanwhile, under a scenario where Congress is split and Harris emerges the winner, stocks of renewable energy companies and tariff-exposed consumer goods could rally, with the resulting decline in yields benefiting housing-sensitive sectors.
Here’s what Wall Street says:
The vigilantes have all the power. Panic is setting in and the coiling we expected is happening.
The market is now pricing in more of a Trump sweep. The election is so close that it’s dominated by seven battleground states, and since none of those states have called, it feels like the market is automatically ahead of itself. But if Trump appears to be performing better overnight, I think the move makes sense.
As Trump’s odds improve in early vote counts, the dollar’s strength is actually hurting the Mexican peso, euro and yen.
The lack of liquidity in early Asian markets and the excitement following early results amplified market moves in pricing as Trump odds rose.
The situation may have worsened because liquidity is still quite tight. We will continue to see wild swings overnight.
Some volatility in the stock market this week is inevitable, but we don’t expect the most likely election outcome to change our 12-month outlook for U.S. stocks. We expect the S&P 500 to rise to 6,600 by the end of 2025, driven by expectations of good U.S. growth, lower interest rates, and continued structural tailwinds from AI. We expect these market drivers to remain in place regardless of who wins the US election.
Our 10-year yield forecast is 3.5% in June 2025. Although we expect yields to be slightly higher than 3.5% under a Trump presidency, we still expect positive returns on bonds over the next 12 months. We do not expect the election results to change the Fed’s rate-cutting course, and inflation continues to trend downward.
We expect the dollar to strengthen somewhat under Trump than under Harris. More pro-growth policies, higher interest rates and tariffs could all provide a tailwind for the dollar. Nonetheless, at current levels, a decline in the value of the dollar is expected regardless of the winner.
Regardless of who becomes president, the peak season between now and the end of the year favors stocks. Especially since a blue sweep isn’t in the cards. The most likely scenario is a hybrid in Washington, where leaders on both sides have to compromise to get the job done. However, a turnaround is still possible, which would benefit stocks through pro-growth policies, which are likely to include aggressive onshoring ambitions, lower corporate taxes and a relaxed regulatory environment. But the bottom line is that it is very important for both investors and traders to watch bond yields as they examine the impact of future policies on inflation, deficits and activity.
Our historical playbook analysis reminds us that the S&P 500 tends to rise regardless of the balance of power in Washington. The strongest backgrounds tend to be a Democratic presidency with a divided Republican Congress, and a Republican controlling the White House with both Congresses. In this context, we focus less on short-term transactions and more on long-term opportunities that may open up due to large gaps around events.
Regardless of the outcome, we believe the dollar will continue to rise.
If Trump wins, USD and Treasury yields are expected to rise as the fiscal and trade policies of his presidency will lead to inflation. This could force the Fed to keep policy rates restrictive for longer. However, Trump’s ambiguous monetary policy is a headwind for the dollar. If Harris wins, we expect USD and Treasury yields to plummet before a recovery underpins the strength of the US economy. Fiscal and trade policies during Harris’s term are unlikely to complicate the Fed’s price stability obligations, which would have a neutral impact on USD and Treasury yields.
We also may not immediately know the composition of Congress. Democrats have a better chance of winning a majority in the House, while Republicans are favored to win the Senate. So we think the most likely scenario is a split Congress. Political gridlock will make it difficult for the next president to enact major fiscal changes.
Investors should look beyond the election and focus on the fundamentals of what drives markets. The economy and earnings continue to do better than expected, most stock prices are reasonable and the Federal Reserve is in easing mode and expected to cut interest rates again this week. Now I have a great background on the stock.
Our message to investors is to buy into the weakness and weakness created by election uncertainty and continue to invest as the market melts due to the Santa Claus rally. I believe the Santa Claus rally will continue through the end of the year, pushing the S&P 500 to 6,150. .
We see opportunities in technology, communications, finance, industrial, utilities and energy.
We expect the Fed to cut interest rates by 25 basis points on Thursday, citing mixed economic data and some weakness in the labor market. An accommodative Fed, slowing inflation, and high earnings is a classic “Goldilocks” economy and a great setup for stocks.
The election is finally here and emotions are running high. Elections are important, but let’s not forget that an economy that continues to perform surprisingly well, record earnings, and a dovish Fed are likely to be more important in this bull market than who’s in the White House.
We know things are getting closer. But we also know that this will be the 13th straight year the S&P 500 has risen due to a split Congress. Stagnation can be a good thing, and it might be something investors should cheer if we see this phenomenon once again.
We see a Trump victory, which is likely to be a blowout scenario, as positive for stocks as he maintains favorable corporate tax treatment and builds on expired tax elements. A Harris victory, which would likely come with a divided Congress, would be a bit of a negative because there would be fewer expiring tax code provisions extended due to political gridlock.
Investors may react to every statement a presidential candidate makes, which could increase volatility leading up to Election Day, but the trajectory of the economy is the most important driver of the stock market over the long term. The Fed’s interest rate cuts will only accelerate that trajectory from here.
First of all, we would like to tell investors not to overreact.
We believe a strong year-end rally is expected for several reasons. Two of them are bear chase scenarios that eventually have to give in, and performance jitters from large money managers who may have missed big moves. Specific name.
We believe the market favors Trump for lower taxes and less regulation, and while Kamala’s case would likely result in higher taxes and tighter regulation, once again the balance of power would make it unlikely we’d see many of the proposed policies implemented. There may not be.
Key events this week:
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Eurozone HCOB Services PMI, PPI, Wednesday
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China Trade, Foreign Exchange Reserves, Thursday
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UK BOE interest rate decision, Thursday
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US Federal Reserve interest rate decision, Thursday
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University of Michigan Consumer Psychology, Friday.
The main movements in the market are:
stock
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S&P 500 futures were up 1.2% as of 1:27 p.m. Tokyo time.
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Nikkei 225 futures (OSE) rise 2%
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Japanese Topix rose 1.8%
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Australia’s S&P/ASX 200 index rose 0.7%.
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Hong Kong’s Hang Seng index fell 2.6%.
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The Shanghai Composite Index rose 0.2%.
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Euro STOXX 50 futures fell 0.1%.
call
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Bloomberg Dollar Spot Index rose 1.4%
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The euro fell 1.6% to $1.0758.
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The Japanese yen fell 1.4% to 153.78 per dollar.
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The offshore yuan fell 1.1% to 7.1828 per dollar.
cryptocurrency
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Bitcoin rose 8% to $74,722.48.
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Ethereum rose 7.3% to $2,590.81.
bond
necessity
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West Texas Intermediate crude fell 0.9% to $71.32 per barrel.
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Spot gold fell 0.3% to $2,736.69 an ounce.
This article was produced with help from Bloomberg Automation.
–With assistance from Vildana Hajric, Richard Henderson, Shikhar Balwani, Carter Johnson, Sydney Maki, and Michael Mackenzie.
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