(Bloomberg) – Numerous trades around the world related to the growing prospects of Donald Trump’s presidential election showed decisive moves, with stock prices continuing to rise, U.S. Treasury yields soaring, and the dollar weakening in March 2020. It was the highest value since March.
S&P 500 futures rose 1.3%, the 10-year Treasury yield rose 18 basis points to a four-month high of 4.46%, and Bitcoin soared to an all-time high. It’s a move that reflects the increased stakes for Trump’s presidency due to Vice President Kamala Harris’ path to victory. It gets narrower.
Wall Street investor groups are betting that President Trump’s pro-growth stance on industrial policy, corporate tax cuts and tariffs could boost stock prices, accelerate inflation and spur bond yields and the U.S. dollar higher. are. 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 rose 2.4%. Given the Republican Party’s protectionist stance, small businesses that typically operate domestically could potentially benefit from a Republican victory. Trump Media & Technology Group soared on Robinhood Markets’ 24-hour trading platform. Stock prices in Japan and Australia rose, but those in Hong Kong fell. Copper, along with most metals, fell as the dollar strengthened. Oil prices have fallen.
The notable moves have focused on a handful of assets considered sensitive to President Trump’s policy proposals, including the dollar, which has strengthened amid plans to increase tariffs and expand the U.S. budget by $1.8 trillion. This includes bond yields that have risen in part in anticipation of possible spending plans. deficit. Cryptocurrencies are seen as benefiting from deregulation and President Trump’s public support for digital currencies.
“We see some of the Trump trades gaining traction right now, including small-cap stocks, cryptocurrencies, interest rates and even Trump media,” said Keith Lerner of the Trust. “Still, we have a long night ahead of us.”
In contrast to Tuesday’s relatively calm session, Wall Street saw the potential for unusual moves, largely independent of the outcome of the election. The S&P 500 could rise 3% with a Republican victory, but could fall by the same amount if Democrats win both the presidential election and Congress, Goldman Sachs Group Inc.’s trading desk said. He said he would get it. If the government were divided, the amount of travel would be halved. JPMorgan Securities’ Andrew Tyler said anything short of a landslide Democratic victory would likely cause stocks to rise.
Morgan Stanley notes that a landslide Republican victory could reduce appetite for risk-taking as fiscal concerns push up yields, but if bond markets become obedient to this, growth-sensitive cyclical stocks It is said that prices will rise. Meanwhile, renewable energy companies and tariff-exposed consumer stocks rebound under a scenario in which Harris emerges as the winner in a divided Congress, and the associated lower yields benefit housing-sensitive sectors. Then I see it.
Here’s what Wall Street says:
The vigilante group is in complete control. Panic has set in and the coils we predicted are beginning to unwind.
Markets are now pricing in more of President Trump’s victory. The election is very close, contested by seven battleground states, none of which have called, giving the impression that the market is ahead of the curve. But I think the move makes sense if President Trump appears to be outperforming overnight.
The strength of the dollar, backed by the rising odds of Mr. Trump in early voting, is having a big impact on the Mexican peso, euro, and yen.
The early illiquidity of Asian markets and the excitement surrounding early earnings amplified the market’s move to price in higher odds for Mr. Trump.
Liquidity is still quite thin, so the situation could be getting worse. The wild price movements are likely to continue overnight.
While some stock market volatility is inevitable this week, we do not expect the expected election outcome to change our view of US stocks over the past 12 months. We expect the S&P 500 to rise to 6,600 by the end of 2025, driven by strong U.S. growth, falling interest rates, and expectations for continued structural tailwinds from AI. Regardless of who wins the US election, these market drivers are expected to remain in place.
Our 10-year yield forecast is 3.5% as of June 2025. Although yields are expected to be slightly higher than 3.5% under President Trump, we still expect positive returns on bonds over the next 12 months. We don’t expect the election results to cause the Fed to change its course of lowering interest rates, and inflation remains on a downward trajectory.
The dollar is expected to be slightly stronger under President Trump than under President Harris. Further pro-growth policies, possibly higher interest rates, and tariffs could all be a tailwind for the dollar. Nevertheless, given today’s levels, we would expect a weaker dollar regardless of the winner.
Regardless of who wins the presidency, strong seasonal stocks favor stocks between now and the end of the year, especially since a blue sweep is not in the cards. The most likely scenario is a mixed Washington, where leaders on both sides of the aisle need to compromise to get things done. However, a red sweep remains a possibility, which would likely support stock prices through pro-growth policies that incorporate aggressive domesticization ambitions, lower corporate taxes, and a subdued regulatory environment. But the bottom line is that it is critical for investors and traders alike to keep an eye on bond yields as they consider the impact of future policy on inflation, budget deficits, and economic activity.
Our historical strategic analysis reminds us that the S&P 500 tends to rise regardless of the balance of power in Washington. The strongest contexts tend to be a divided Congress or a Republican-controlled Democratic presidential administration, with Republicans controlling both houses of Congress as well as the White House. In this context, we are more focused on long-term opportunities that may open up from large gaps before and after the event, rather than on short-term trades.
Regardless of the outcome, we believe the dollar will continue to appreciate.
Fiscal and trade policies under President Trump are inflationary, so if Trump wins, the U.S. dollar and government bond yields are expected to rise. This could force the Fed to maintain restrictive policy rates for an extended period of time. However, President Trump’s ambiguous monetary policy is a headwind for the US dollar. If Harris wins, the U.S. dollar and Treasury yields are expected to fall sharply before a recovery supported by a strong U.S. economy begins. Fiscal and trade policies under President Harris are unlikely to complicate the Fed’s price stability mandate, which has a neutral impact on the U.S. dollar and Treasury yields.
Additionally, the makeup of Congress may not be immediately known, with Democrats likely to gain a majority in the House and Republicans likely to win the Senate. We therefore believe that a divided Congress is the most likely scenario. Political gridlock will make it difficult for the next president to implement major fiscal reforms.
Investors need to look past the election and focus on the fundamentals of what moves markets. The economy and earnings continue to beat expectations, most stocks are reasonably priced, and the Fed is in easing mode, expected to cut rates again this week. There is a great environment for the stock market right now.
Our message to investors is to buy into the chop and weakness caused by election uncertainty and remain fully invested as the market melts in the Santa Claus rally. The Santa Claus rally is expected to continue until the end of the year, pushing the S&P 500 to 6,150. .
We see opportunities in the technology, communications, finance, industrial, utilities and energy sectors.
The Fed is expected to cut interest rates by 25 basis points on Thursday, citing mixed economic data and weakness in parts of the labor market. The Fed’s accommodative inflation, slowing inflation, and strong earnings are the classic “Goldilocks” economy, which is a great environment for stocks.
The election is finally upon us and emotions are running high. Elections are important, but let’s forget that a surprisingly upturning economy, record profits, and a dovish Fed are likely more important to this bull market than who’s in the White House. Don’t go.
Things are close, we know that. But we also know that this year marks the 13th straight year the S&P 500 will end with a gain despite a divided Congress. Gridlock can be a good thing, and if we see this again, this could be something investors should be rooting for.
We view a Trump victory, likely in a landslide scenario, as corporate tax benefits are maintained and the lapsed tax component is further strengthened, which would be a net positive for stocks. A Harris victory would likely involve a divided Congress, which would be slightly negative because there would be fewer extensions to the tax law that are set to expire due to political gridlock.
While there may be volatility leading up to Election Day as investors react to everything presidential candidates say, the trajectory of the economy will be the most important driver for stock markets over the long term. With the Fed’s interest rate cuts, that trajectory should accelerate from here.
First, we would like to tell investors not to overreact.
We believe we are poised for a strong year-end rally for a number of reasons. Two of these are a possible chase scenario by the bears that will eventually have to capitulate, and the other is performance uncertainty from large asset managers who may have missed a big move in the market. specific name.
We believe the market favors Mr. Trump for lower taxes and less regulation, and while we expect Mr. Kamala to increase taxes and tighten regulations, the balance of power still favors the policies they propose. Many of these will probably never be implemented.
This week’s main events:
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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 Fed interest rate decision Thursday
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University of Michigan Consumer Sentiment, Friday
The main movements in the market are:
stock
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As of 1:27 p.m. Tokyo time, S&P 500 futures were up 1.2%.
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Nikkei 225 futures (OSE) rose 2%
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Japan’s TOPIX rose 1.8%
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Australia’s S&P/ASX 200 rose 0.7%
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Hong Kong’s Hang Seng fell 2.6%
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The Shanghai Composite rose 0.2%.
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Euro Stoxx50 futures fell 0.1%
currency
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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 yen to the dollar.
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The offshore yuan fell 1.1% to 7.1828 yuan to the dollar.
cryptocurrency
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Bitcoin rose 8% to $74,722.48
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Ether rose 7.3% to $2,590.81
bond
merchandise
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West Texas Intermediate crude oil fell 0.9% to $71.32 a barrel.
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Spot gold fell 0.3% to $2,736.69 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Vildana Hajric, Richard Henderson, Shikhar Balwani, Carter Johnson, Sydney Maki, and Michael Mackenzie.
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