Trump victory fuels US stock market surge, strengthens dollar

The financial markets saw dramatic moves following Donald Trump's projected victory in the 2024 US presidential election, with US stocks hitting record highs, the dollar strengthening, and bond prices taking a hit.

Investors reacted swiftly, buoyed by expectations of Trump's economic policies, including tax cuts, deregulation, and trade tariffs, which they believe will boost growth but may also stoke inflation.

The US stock market surged, with the S&P 500 rising 2.51% to an all-time high. Small-cap stocks and banks, in particular, saw substantial gains, as these sectors are expected to benefit from Trump's pro-business stance and regulatory rollbacks.

Shares of Tesla jumped 14.75%, and the Russell 2000 index, which tracks small-cap stocks, climbed nearly 6%.

Other tech stocks also saw significant gains, with Bitcoin reaching new record highs, partly due to speculation that Trump's presidency would encourage a lighter approach to cryptocurrency regulation.

The dollar rose sharply, hitting its highest level in over four months, as traders anticipated economic growth driven by Trump's policies.

The Mexican peso and the euro, on the other hand, saw declines, with the peso falling to its lowest point in over two years due to concerns about higher tariffs under Trump's trade policies.

In the bond market, US Treasury yields spiked, particularly the benchmark 10-year yield, which rose to 4.48%, its highest in months.

The sell-off in Treasuries reflects worries that Trump's promised fiscal stimulus, including tax cuts and increased government spending, could lead to higher deficits and inflation.

Investors are also expecting inflationary pressures to rise due to tariffs and higher consumer prices, further pushing up long-term interest rates.

"Bigger deficits, bigger tax cuts, and higher inflation should push up long-term interest rates," said David Kelly, Chief Global Strategist at JPMorgan Asset Management.

This expectation of higher inflation and a more expansive fiscal policy contributed to the market's mixed sentiment, as Treasury bond prices fell.

The election result also reshaped expectations about the US Federal Reserve’s monetary policy. Markets now predict that the Fed may hold off on aggressive interest rate cuts, with some analysts forecasting only one rate cut in 2025, as the central bank adapts to the potential inflationary impact of Trump's economic agenda.

"Higher tariffs could lead to higher inflation in the short term, delaying the Fed's path to further easing," said economists at Nomura.

Global markets reacted to the US election results as well. Asian stocks rose on Thursday, with Japanese stocks seeing gains due to a weaker yen, while Australian markets were boosted by higher bank shares in the wake of rising US Treasury yields.

However, markets in China and Europe showed mixed results, as investors weighed the potential impact of Trump's policies on international trade and tariffs.

Overall, Trump's victory has shifted investor sentiment towards pro-growth assets, with optimism about the US economy driving the stock market and the dollar.

However, concerns about inflation and trade tensions remain as major factors influencing market dynamics in the coming months.

Donald Trump has won a second term as US president, securing over 270 electoral votes. His Democratic opponent, Vice President Kamala Harris, has congratulated him and pledged support for a peaceful transition of power.

Trump triumphed in key battleground states, including Michigan, Georgia, North Carolina, Pennsylvania, and Wisconsin.

World leaders have quickly extended their congratulations, and the Republican Party has regained control of the Senate.

As the situation develops, analysts are closely watching how Trump's policies will play out in Congress, especially if Republicans gain control of both chambers, further clearing the path for his economic agenda.