The “Trump trade” is back in full swing.
Following Donald Trump’s election, stocks surged, the dollar strengthened, and Treasury prices tumbled, with investors quickly adjusting to a potential second Trump presidency. Key sectors saw a rally, as expectations shifted regarding tariffs, taxes, government borrowing, and cryptocurrencies.
Trump’s anticipated economic policies are expected to impact a wide range of areas, prompting investors to quickly reflect these changes in stock, bond, and currency markets worldwide. A stronger dollar and rising Treasury yields indicate bets that Trump’s policies may widen the budget deficit and drive inflation, while tariffs could impact key U.S. trading partners. The yield on the 10-year Treasury reached 4.4%, approaching its highest level since July.
“We’re seeing a full-on ‘Trump trade’ in the markets,” said Stephen Dainton, head of Barclays’ investment bank.
Shares in Trump Media, known as DJT, skyrocketed, while Tesla—led by Trump supporter Elon Musk—also saw sharp gains. Cryptocurrency-related stocks surged alongside bitcoin’s rapid rise.
Bank stocks, private prison companies, and firearm manufacturers experienced strong gains, while oil prices and solar-energy stocks fell.
Highlights from the Market:
- U.S. stock indexes: The Dow Jones Industrial Average climbed 3%, hitting an intraday high and on track for a record close.
- Small-cap stocks: The Russell 2000 index jumped over 4%.
- Bond yields: Long-term yields surged, with the 30-year Treasury yield increasing by more than 0.19 percentage points to 4.63% as higher Treasury issuance is expected.
- Dollar strength: The ICE U.S. Dollar Index was set for its strongest performance since Brexit in 2016. Currencies likely affected by Trump tariffs, including the euro, yen, yuan, and Mexican peso, weakened.
- Bitcoin: Bitcoin hit a new record intraday high, surpassing $73,000.
- Market volatility: The VIX, Wall Street’s fear gauge, dropped as investors pulled back on bets that election uncertainty would drive up market volatility.
The markets have swiftly responded to align with Trump’s potential policy impact, reflecting investor sentiment across multiple sectors and asset classes.
