NEW YORK, USA – U.S. stock markets surged Wednesday, November 6, 2024, morning following former President Donald Trump’s return to the White House in a decisive election victory.
The Dow Jones Industrial Average leaped 1,309 points, or 3%, marking its first 1,000+ point gain since November 2022.
If sustained through the day, it would be among the Dow’s top ten single-day point gains. The S&P 500 and Nasdaq also rose by 2% each as Wall Street rallied on the anticipated policy changes that may come with a new Trump administration.
Market relief was palpable, as Trump’s clear victory sidestepped the potential for prolonged election disputes, allowing businesses to solidify plans amid an increasingly predictable environment.
“There’s clarity: We’re not going to see another January 6th event. The market is breathing a huge sigh of relief,” said Michael Block, COO of AgentSmyth.
Markets, known for favouring stability, reacted to the swift conclusion of the election, which saw Trump flip several swing states, delivering control of the Senate to Republicans while key House races remain undecided.
Pro-Business Outlook Fuels Market Optimism
Investors are eyeing a “business-friendly, tax-friendly regime,” Block noted, with the anticipated Republican “red wave” set to introduce potential deregulation and other economic policies likely to boost corporate profits.
JPMorgan analysts had predicted a red wave scenario would benefit stocks through 2024, despite uncertainties over the sustainability of these pro-business policies.
Notably, while markets historically perform better under Democratic administrations, the short-term gains reflect optimism about the potential economic shifts under Trump’s policies.
Art Hogan, chief market strategist at B Riley Wealth Management, remarked, “The market is saying: We just elected a business-friendly president.”
However, Hogan tempered his comments by noting that the initial enthusiasm could be temporary, with investors waiting to see how policy changes materialise in the months ahead.
Impact on Federal Policies and the Fed’s Approach
Trump’s pro-growth stance includes promises of further tax breaks and infrastructure spending, which could amplify federal debt levels.
Already, the U.S. Treasury market saw bond yields rise to 4.47%, with the 10-year yield reaching its highest level since July, potentially complicating the Federal Reserve’s recent rate-cutting measures aimed at curbing inflation.
Higher Treasury yields could translate to higher consumer loan costs, such as mortgage and credit card rates, as they closely track Treasury yields.
The Federal Reserve, which has been pivoting toward rate cuts to support the economy, is expected to make its next policy decision Thursday.
The market response could prompt the Fed to adjust its approach amid Trump’s potential for increased public spending and heightened inflationary pressures.
Trump-Linked Stocks and Cryptocurrencies Surge
Trump’s return to office also sent shares of Trump Media & Technology Group (TMTG), which owns the social media platform Truth Social, soaring by nearly 24%.
Additionally, cryptocurrency markets saw Bitcoin rocket to new heights above $74,000, with Trump’s evolving stance on digital currencies adding momentum.
Bank stocks, expected to benefit from deregulatory policies, saw significant gains, with Citi, Bank of America, and JPMorgan Chase up between 7% and 8.5%.
The U.S. dollar appreciated by 1.7% against the euro and the British pound, reaching a peak last seen in July.
Trump’s proposed tariff hikes on imports are expected to bolster domestic demand for U.S. goods, though economists caution that such policies could inadvertently increase consumer prices.
Global Markets React to Trump’s Victory
International markets had a mixed response to Trump’s victory. European stocks underperformed, with the Stoxx Europe 600 index up just 0.1% after shedding earlier gains.
Germany’s DAX fell 0.3%, while France’s CAC and London’s FTSE 100 each posted modest gains. Asian markets showed varied responses, with Japan’s Nikkei 225 closing 2.6% higher, benefitting from increased U.S. investment, while China’s Shanghai Composite remained flat and Hong Kong’s Hang Seng dropped 2.2% amid concerns over new U.S. tariffs.
The expectation of heightened tariffs on Chinese goods spurred a selloff in Chinese equities.
“Chinese equities sold off overnight in expectation of more tariffs on U.S. imports from China,” explained Daniel Murray, deputy CIO and head of research at EFG Asset Management.
A New Chapter: Business and Policy Implications
Trump’s policies could accelerate shifts in both domestic and global trade dynamics.
Supporters believe his administration’s focus on tax breaks and deregulation could drive economic growth, while detractors warn that his approach may widen the federal deficit and complicate inflation management.
As markets react to Trump’s return, businesses and consumers alike are bracing for the policy changes ahead, and the short-term market rally reflects a cautious optimism that his administration will stabilise economic conditions while fuelling growth in select sectors.
The long-term implications of his policies, however, remain to be seen as the former president prepares to take office with a strong pro-business mandate.
