new york
CNN
—
U.S. stocks soared Wednesday after former President Donald Trump won a decisive and consequential victory in Tuesday's U.S. presidential election.
The massive rally began in pre-market trading and continued into the morning and afternoon trading hours. The Dow Jones Industrial Average rose 1,507 points, or 3.57%, to close at a new all-time high. This is the first time since November 2022 that the blue-chip stock index rose more than 1,000 points in a single day.
The S&P 500 and Nasdaq index also hit new highs, with the S&P up 2.5% and the tech index closing 2.95% higher. The US dollar hit a two-year high and US Treasury yields also rose.
The market was mainly buoyed by the fact that the election was decided relatively quickly. The election, and the widely held belief that Mr. Trump and his allies could challenge the result in court, have loomed over the U.S. economy and stock markets in recent months. Markets are especially hungry for certainty, and a clear path forward will allow companies to adjust their business and hiring plans.
“What is clear is that the January 6th event will not happen again. The market is breathing a huge sigh of relief at this,” said Michael Block, chief operating officer at AgentSmith. . “The mainstream consensus was that we don't know. And we do know.”
But stocks may also be reacting specifically to Trump's victory. Trump reversed several battleground states from President Joe Biden's 2020 victory, and Republicans also took control of the Senate. Several key House elections remain undecided. A so-called red wave could usher in an era of deregulation and other pro-business laws and policies that investors believe will benefit stock markets.
“There's a huge recognition, especially with their Senate victory, that we're going to have a business-friendly, tax-friendly system,” Bullock said.
Analysts at JPMorgan said in a report ahead of Tuesday's election results that stocks are expected to rise until the end of 2024 under a “red wave,” but that “uncertainty around policy execution will become more pronounced in 2025.” “It will happen,” he predicted.
But regardless of which party controls the White House, markets and the economy have generally fared better under Democratic presidents, even as stock prices have soared. According to Sam Stovall of CFRA Research, the S&P 500 rose an average of 10% under Democratic administrations and 6.7% under Republican administrations. Gross domestic product (GDP), the broadest indicator of the U.S. economy, averaged 3.9% under Democratic presidents, much higher than 2.4% under Republican presidents.
“This was a market that was roiled for extreme reactions either way,” said Art Hogan, chief market strategist at B. Riley Wealth Management. “The market is saying, we just elected a business-friendly president. … The initial reaction to the Trump administration is enthusiasm that may be short-lived.”
What President Trump Means for Business and You
President Trump has advocated policies such as tax cuts and increased public spending that could cause problems for the economy and significantly increase the U.S. budget deficit. This caused the value of U.S. Treasuries to fall and yields, which trade inversely to bond prices, to soar.
The yield on the 10-year Treasury note rose to 4.4%, undermining the Federal Reserve's efforts to lower interest rates to boost the economy. The Fed has been raising interest rates for the past few years to combat a devastating surge in inflation. However, it began cutting rates in September and is widely expected to cut rates again at the end of a two-day policy meeting on Thursday.
“If tariffs go up, the Fed is in no position to cut rates even if the economy slows, which is a toxic combination for bonds,” said Andrzej Skiba, head of BlueBay U.S. fixed income at RBC Global Asset Management. said. He pointed out that the bond market may continue to struggle.
While the federal funds rate can affect Treasury yields, consumer loans such as mortgage rates, auto loans, and credit cards are more closely tied to Treasury yields. So Trump's victory appears to have kept those percentages somewhat high, at least for now.
Other so-called Trump trades soared Wednesday, including the stock of his social media stock, Trump Media & Technology Group. TMTG stock, which trades under the symbol “DJT,” soared nearly 24% to close around 6% higher.
The dollar also rose 1.7% against the euro and pound sterling, hitting its highest since July. The dollar could benefit from President Trump's radical plan to significantly increase tariffs, perhaps increasing demand for American goods at home, but most economists oppose the plan. , many suggest that consumer behavior will not change.
But President Trump's tariff plans could push up inflation, which could undermine the Fed's efforts to lower interest rates.
Bitcoin also topped $76,000 for the first time on Wednesday. President Trump was widely opposed to cryptocurrencies during his first term, but has become more positive about them in recent months.
Bank stocks that could benefit from deregulation surged, with Citi up 8.4%, Bank of America up 8.4% and JPMorgan Chase up 11.5%. Stocks in the detention and deportation space, including GEO Group and CoreCivic, rose 42% and 29%, respectively.
Meanwhile, Tesla stock closed up 15% on Wednesday. The electric car market may be lost during Trump's presidency, but Tesla CEO Elon Musk, through his support for and friendship with Trump, hopes to soon be in the White House. “The door could be opened” to , wrote Nikos Zaboulas on multi-asset trading platform Tradu.
European stocks underperformed US stocks on Wednesday. The region's benchmark STOXX Europe 600 index rose 0.1%, lagging earlier gains. Germany's DAX fell 0.3% on the day, France's CAC rose 0.1%, while London's FTSE 100 traded 0.5% higher.
In Asia, the situation was different. Japan's Nikkei Stock Average ended 2.6% higher, while Australia's S&P ASX rose only 0.8%.
“A strong President Trump and a weak (Japanese) government should be a good combination for the Japanese market, especially the stock market. U.S. pension funds heading to Asia will continue to face challenges investing in China,” the company said. said Neil Newman, head of strategy. Astris Advisory in Tokyo.
In China, the Shanghai Composite Index closed almost flat, while Hong Kong's Hang Seng Index closed down 2.2%.
“Chinese stocks sold off overnight in anticipation of additional U.S. tariffs on Chinese imports,” Daniel Murray, deputy chief investment officer and head of research at EFG Asset Management, said in a note. said.
