Trump’s Re-Election Prospects Send Shockwaves Through Markets

Global markets are responding sharply to increasing prospects of Donald Trump securing re-election, with U.S. stocks, Treasury yields, and the dollar all experiencing notable movements. Investor sentiment appears buoyed by expectations of Trump’s familiar policies, characterized by tax cuts, deregulation, and domestic industry support.

Trump Trades Gain Momentum as U.S. Stocks, Yields Jump

U.S. equity futures rallied on the back of Trump’s rising political momentum. S&P 500 futures climbed by 1.2%, reflecting renewed risk appetite, while the 10-year Treasury yield surged 19 basis points to 4.47%, reaching a four-month high. Bitcoin also hit a record peak, driven by expectations of lighter regulation under a Trump administration. Small-cap stocks, tracked by the Russell 2000 Index, surged 2.4%, benefiting from expectations of policies favoring domestic-focused companies.

Dollar Strengthens Amid Market Adjustments

The U.S. dollar soared 1.6%, marking its largest advance since March 2020, reflecting increased investor confidence in pro-growth policies under Trump. Key global currencies fell against the dollar, with notable declines in the Mexican peso, Japanese yen, and euro. The dollar’s rally indicates market anticipation of tax cuts and the potential for protective trade measures aimed at boosting U.S. industries.

Global Reactions: Mixed Sentiment Across Markets

International markets showed a mixed response. In Asia, the offshore yuan weakened and Hong Kong’s Hang Seng Index slipped, while Japanese equities advanced, benefiting from the weaker yen. European stock futures fell amid concerns that renewed trade tensions and tariffs under a Trump presidency could hurt export-reliant sectors.

Analysts’ Perspectives: Diverging Outlooks

Market strategists offered varied projections depending on the outcome of the election. Goldman Sachs anticipates a potential 3% gain in the S&P 500 if Republicans gain full control of the White House and Congress, but expects a potential downturn should Democrats win both. UBS remains optimistic, forecasting the S&P 500 to rise to 6,600 by the end of 2025, regardless of the election result, attributing growth to advances in artificial intelligence and stable U.S. economic conditions. Morgan Stanley points to benefits for growth-sensitive cyclical stocks under a Republican sweep, while suggesting a Harris win with a split Congress could favor renewable energy and consumer sectors.

Market Moves: Currencies, Cryptocurrencies, and Commodities

• Currencies: The euro, yen, offshore yuan, and Australian dollar all weakened against the surging dollar.
• Cryptocurrencies: Bitcoin surged 8%, while Ether climbed 7.4%, indicating a positive outlook for digital assets under potential relaxed regulation.
• Commodities: WTI crude dropped 2% to $70.52 per barrel, while gold fell 0.4% to $2,734.04, as investors moved away from safe-haven assets amid risk-on sentiment.

Investor Sentiment and Warnings

The market’s strong reaction underscores investor optimism that a Trump presidency would bring back business-friendly tax cuts and deregulation, especially within the cryptocurrency space. However, strategists are cautioning against overreactions, emphasizing the importance of keeping focus on market fundamentals. Despite uncertainty, some analysts suggest the potential for an end-of-year rally as markets stabilize and growth prospects become clearer.