A Market-Moving Trump Victory

Wednesday Morning: What We Know

Donald Trump has been elected as the 47^th President of the United States. As it stands Wednesday morning, Trump has obtained 276 electoral college votes, surpassing the 270 needed for victory. Additionally, the Republican party has flipped three Senate seats and taken hold of a majority of the U.S. Senate, with the House of Representatives still up for grabs. Votes are still being counted in a number of states, but it appears that Trump may have won all seven swing states as well as the popular vote – the first Republican to do so since 2004.    

What is the Market Telling Us?

Markets are higher on Wednesday, in part because we now have an answer. The S&P 500 is up 2%, followed by strength in the U.S. Dollar, Bitcoin, and higher U.S. Treasury yields. The dollar and yields are surging on the projection of faster economic growth, stickier inflation (tied to growth and tariffs), less regulation, and lower government expenditures.

Chart 1: 10-Year Treasury Yield and the U.S. Dollar Spike Following a Trump Win^[1]

Equity Market Reaction

Stocks are higher across the board with volatility falling off a cliff. Financials are leading up 5% in hopes of a steeper yield curve and less regulation, enticing more M&A activity. Industrials, consumer discretionary, energy, and technology are all up over 2%, with the laggards being rate-sensitive sides of the market. Real estate and utilities are both down 1%. The consensus is that more growth and inflation will lead to higher interest rates, ultimately being a drag for these two sectors.

Stocks with upside exposure to a Trump presidency are rallying. Wells Fargo (WFC), Morgan Stanley (MS), Cleveland Cliffs (CLF), Tesla (TSLA), and regional banks (KRE) are just a few that are up over 10%.

Chart 2: Banks, and Trump-Exposed Equities, Are Up +10%^[2]

What Happens Next

Markets tend to move higher regardless of which party controls the White House. With the election now behind us, investors can move back to focusing on what matters: earnings, economic growth, and investing in strong businesses. Later this week we will likely receive another 25-basis point cut from the Fed and possibly more stimulus from China.

In our view, the U.S. economy remains in solid shape with 2.5% GDP growth, lower inflation, healthy consumer activity and the onset of a manufacturing renaissance. We believe we will rally into year-end with $6.4 trillion in money market funds soon to be deployed into the market.  

Stephanie Link’s TV Schedule:

Sources:

[1] Source: FactSet. As of November 6, 2024.

[2] Source: FactSet. As of November 6, 2024.

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