How Investors Are Reacting to Trump’s Win

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(Bloomberg) — A risk-on frenzy enveloped financial assets early Wednesday as Donald Trump clinched the White House for a second term, decisively winning what had been seen as a neck-and-neck race against Vice President Kamala Harris.

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US stocks soared, with S&P 500 futures climbing more than 2% in premarket trading and riskier parts of the stock market such as small caps posting the biggest gains. The VIX Index “fear gauge” of stock-market volatility fell below 16, declining from the elevated levels it touched in the days leading up to the vote.

Elsewhere, the dollar posted its biggest gain against major currencies since 2020 and Bitcoin rallied to a new record, while US 10-year yields rose to a four-month high — all manifestations of the “Trump trade” seen as keying off of his platform of tax cuts and tariffs.

Trump was elected Tuesday following a contentious US presidential race that kept traders on edge. His Republican party also gained control of the Senate, with the House of Representatives still in play, a variable that will help to determine how forcefully Trump can push through his policy agenda.

The reaction across Wall Street echoed moves seen after Trump’s first presidential victory in 2016, reflecting enthusiasm that potential tax cuts and deregulation will spur economic growth and profits. At the same time, some warned the sharp moves may also partly be a knee-jerk reaction to an election result that came through more clearly and quickly than expected. Others cautioned that the spike in US yields could ultimately pressure risk assets if sustained.

As if the election wasn’t enough, there’s this week’s Federal Reserve policy meeting. Officials are widely expected to deliver a quarter-point cut to their benchmark interest rate on Thursday, another potential catalyst for market moves.

Here’s how investors and market watchers are reacting to the election results and more:

Ryan Grabinski, director of investment strategy and quantitative research at Strategas Securities, LLC:

“The biggest takeaway from last night is that we received certainty that the market craves. This will allow both business and consumer confidence to improve. The early rally in the futures, especially small caps, seems overdone since interest rates are widely moving higher, not lower, and they are more sensitive to rates. Attention now should shift to the Fed meeting tomorrow. The 10-year is approaching the 4.5% level, thats the level risk assets ran into some trouble in the last 24 months.”

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