The 'Trump trade' is taking off with Trump Media stock and bitcoin spiking as the former president nears victory
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- Markets are moving on US election results that strongly point to a Donald Trump victory.
- Trump Media stock soared as much as 62% in premarket trading, and bitcoin touched a record high.
- Treasury yields and the dollar gained on Trump's proposed tariffs, deportations, and other policies.
Investors are piling into the Trump trade as a second Donald Trump presidency appears all but certain.
Barring any upsets, Trump will reach the 270-vote Electoral College majority necessary to win.
"The so-called 'Trump trade' is in full swing this morning," Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said in a note.
"The US yields are pushing higher on expectation of further debt ballooning under a Donald Trump presidency. Bitcoin hit a fresh record. In the traditional currency markets, the US dollar is rallying against most majors."
Even before Trump emerged as the likely winner early on Wednesday morning, a strong showing after polls closed resulted in the Trump trade — which has for months hinged on the former president's election odds — gathering momentum.
Central to the trade are Trump's plans for a near-universal tariff — which would likely accelerate inflation — and mass deportations.
Here's a rundown of how markets are moving in response to Trump's apparent victory:
Stock futures moved higher
Supporters of Trump's proposed tax and regulatory policies view them as pro-business moves that would boost corporate profits and deal activity.
S&P 500 futures were up 2.2%, while Dow Jones Industrial Average futures were up 2.7% and Nasdaq 100 futures rose 1.7%.
"Stocks markets so far like the clarity of the Trump win this morning and futures are pointing to a firm open," Neil Wilson, chief market analyst at Finalto, said in a morning note.
Traders' positive reaction also reflected their broader optimism about the US economy.
"Economic growth continues to be strong, earnings growth throughout Q3 reporting season has been solid, and the forceful 'Fed put' continues to underpin sentiment," Pepperstone's Brown said.
"Now, with electoral uncertainty having been removed, the course is clear for further gains to take the market into year-end," Brown added.
European stocks followed the lead of US futures, with the UK's benchmark FTSE 100 up 1.3% at 9:30 a.m. local time (4:30 a.m. ET). In Germany, the DAX was up 1.4%, while France's CAC40 rose 1.7% in morning trade.
Trump Media and Tesla gain
Trump Media and Technology Group shares jumped as much as 62% to $55 in premarket trading and were up 33% at the last check. The stock has enjoyed a meme-like rally in recent weeks as the former president strengthened his position in betting markets and the polls.
Traders boosted other stocks expected to benefit from a second Trump term, pushing Elon Musk's Tesla up 12% and crypto companies MicroStrategy and Coinbase up 13% and 12%, respectively.
Treasury yields are sharply higher
The benchmark 10-year Treasury yield climbed 13 basis points to 4.41%, the highest since early July. The two-year yield — the most directly sensitive to Fed monetary-policy changes — gained 6 basis points to reach 4.25%.
A Trump victory is viewed as an inflationary event, which would fuel higher prices and wage growth.
Investors have been pricing in higher yields for weeks on the view that Trump's policies would make it hard for the Fed to lower rates much further, especially if inflation flares.
The strong reaction in the Treasury market "suggests that bond investors are putting the election result, and the economic consequences of a Trump victory, ahead of the Federal Reserve, even though the Fed is expected to cut interest rates this week and embark on a rate cutting cycle for the next year," Kathleen Brooks, research director at XTB, said in a morning note.
The US dollar surged
The Bloomberg Dollar Spot Index was up 1.3% after gaining as much as 1.7% — the most in four years. The greenback climbed against every G10 currency, including gains of 1.5% against both the euro and yen.
The dollar also rose 2.2% against the Mexican peso. The currency cross has been seen as a bellwether of Trump's election chances, given his expressed desire to "reshore" Mexican manufacturing back to the US.
The expected inflationary nature of Trump's policies would likely push interest rates higher and could prompt the Fed to tighten monetary policy, reversing its current easing efforts. Those climbing rates would then underpin further dollar gains.
"The election outcome strengthens the existing USD bull case, with US economic growth set to continue outperforming that of peers for the foreseeable, and participants not especially perturbed by the Fed's rapid pace of policy normalization," Michael Brown, senior research strategist at Pepperstone, said in a morning note.
Small-cap stocks spiked
Futures on the small-cap Russell 2000 index rose 5.9% as of 4:14 a.m. in New York. They are viewed as getting an outsize boost from Trump's protectionist policies since they generally have more domestic operations.
Bitcoin hit a record high
The cryptocurrency set a new high above $75,000 before retreating to around $73,000. A Trump win is seen as bullish for bitcoin and the broader cryptocurrency industry, as Trump has firmly embraced digital assets in recent years.
"For many, bitcoin is a hedge against currency devaluation and inflation, as it operates outside of traditional monetary policy constraints," Naeem Aslam, chief investment officer at Zaye Capital Markets, said in a morning note.
"With Trump's win, the conditions may be right for Bitcoin's price to continue its ascent as investors seek alternatives to the dollar," he added.
Volatility drops
The CBOE Volatility Index, which measures expected volatility in the stock market over a rolling 30-day period, dropped sharply around 3 a.m. ET Wednesday, soon after it became clear that Trump was set for victory. The VIX fell by more than 20%, likely reflecting investors' welcoming of a clear outcome in the election.