The Impact of Trump’s Victory on Financial Markets: The U.S. financial markets have experienced notable rises in stock indices and bond yields,
while the dollar was on the brink of recording its best day since 2022.
These movements reflect investor expectations of Donald Trump’s return
to the presidency and the possibility of Republicans controlling the Senate and the House of Representatives.
Below is a review of the performance of various assets and the anticipated political impact.
Content
Performance of U.S. Stock Indices
Expectations for the Federal Reserve
Impact of Congressional Composition
Conclusion
Performance of U.S. Stock Indices
U.S. stock indices reached historic levels,
with the S&P 500 index rising by 2.6% due to expectations that the new administration would adopt growth-supportive policies,
strengthening U.S. companies.
According to data from “Birinyi Associates” and “Bloomberg,”
the index achieved its best post-election performance in history.
The Russell 2000 small-cap index also increased by 5.6%, benefiting from anticipated protective policies,
while bank stocks rose amid expectations of tax cuts and reduced regulatory hurdles.
Health insurance stocks also posted notable gains due to expectations of higher payments for senior care service providers.
Drop in the “Fear Index” and Rising Trading Volumes
The VIX, known as the “fear index” on Wall Street,
saw its most significant drop since August, accompanied by increased stock trading volumes.
The Dow Jones Transportation Index rose to a new high,
ending a three-year streak without record highs.
These gains reflect the Dow Theory,
which indicates that simultaneous gains in critical indices signal periods of strong growth.
Bahnsen’s Remarks on Investor Sentiment
David Bahnsen of “The Bahnsen Group” emphasized that investor sentiment supports growth and deregulation,
with expectations of a resurgence in merger and acquisition activity.
He also highlighted the possibility of extending or increasing tax cuts to provide further market support.
Bond Yields and Dollar Movements
U.S. bond yields rose significantly, especially for long-term bonds,
amid reduced Federal Reserve rate cut expectations.
The dollar index rose by 1.3%, while major currencies such as the euro and yen weakened.
Stability of the Peso and Bitcoin’s Record High
The Mexican peso remained stable following a decline,
while Bitcoin reached a new record high, driven by Trump’s embrace of digital assets during his campaign.
Commodities came under pressure, with gold and copper prices declining while oil slightly decreased.
Clarity on the Elections
Ryan Grabinski from (Strategas) stated:
“The biggest lesson we learned from last night is that we have gained the clarity and certainty that the market has been craving.
This clarity will enhance the confidence of companies and consumers.”
He added, “The focus should now turn to the Federal Reserve meeting tomorrow.
The 10-year bond yield is approaching the 4.5% level,
which is a point at which risky assets have faced challenges over the past two years.”
The S&P 500 index settled near 5930 points, marking its 48th record high of the year.
The Nasdaq 100 rose by 2.7%, while the Dow Jones Industrial Average increased by 3.6%.
The “Magnificent Seven” index, which includes companies such as
Meta, Amazon, Tesla, Apple, Alphabet, NVIDIA, and Microsoft
reached an all-time high, led by Tesla’s 15% share increase.
Shares of “Trump Media & Technology Group” also rose by 5.8%.
At the end of the day, Qualcomm, the world’s largest seller of smartphone processors,
announced positive sales forecasts.
Opinions and Warnings on Future Movements
Keith Lerner of “Truist” noted that markets are currently pricing
in most of the positives despite complexities related to interest rates and growing deficit concerns.
Meanwhile, Thierry Wizman from “Macquarie” cautioned against pushing yield expectations too far,
suggesting potential fiscal restraint by the administration.
Expectations for the Federal Reserve and Interest Rates
The Federal Reserve is expected to reduce interest rates by a quarter-point,
Further cuts are anticipated in the coming months,
according to officials like Yong Yu Ma from “BMO Wealth Management.”
Impact of Congressional Composition on Policies
The composition of Congress will be a critical factor moving forward,
as Republican gains in crucial states could influence economic policies.
A Republican sweep may drive the implementation of stimulating tax policies.
Conclusion
Macroeconomic factors and political shifts continue to drive market dynamics.
Analysts believe that the coming period could offer significant opportunities
for financial markets amid stable indices and increased optimism for a growth-supportive approach.
The Impact of Trump’s Victory on the Financial Market