Trump Trades gain as Republicans win swing states, US Senate
Donald Trump declared victory in the early hours of Wednesday with wins in crucial swing states set to seal a second term in the White House for the Republican.
The coin-toss presidential election has removed certainty from the markets, but that’s exactly what they crave, aided by early confirmation of who will be the 47th President of the United States of America.
Early Wednesday, S&P futures were up more than 2%, the dollar index gained 1.4%, and Bitcoin reached a new record high above $75K. Meanwhile, shares in Trump’s own media company surged more than 60%, although the company has had a bumpy ride since its public debut through a merger with a SPAC in March.
“The Trump trade has been coming good this morning,” Jane Foley, head of FX strategy at Rabobank told Bloomberg. “Further dollar strength remains possible if a red sweep is confirmed.”
For the bonds market, a sell-off has been underway on the basis that the Fed will make more aggressive rate cuts as tariffs from a Trump administration would fuel price rises.
“Trump’s plan for tariffs and taxes should result in higher inflation and higher deficits and that should mean higher long end rates,” Priya Misra, portfolio manager at JPMorgan Investment Management told Bloomberg.
For certain sectors and individual companies, a Trump win could be highly advantageous. Tesla stocks gained 12% overnight amid trading on Robinhood, Fortune.com reported. Elon Musk could land a job in the Trump administration, potentially looking at improving government efficiency.
RENEWABLES UNDER PRESSURE
With the Republicans also regaining control of the Senate, a confirmed win for Trump will give some strong signals of what might happen in the first 100 days of his administration and beyond.
Key questions include whether Trump will push ahead with repealing the Inflation Reduction Act and how sectors such as energy might be impacted, potentially good news for oil and gas at the expense of renewables, although this is not certain. Green energy stocks are among the losers globally in early trading.
“Assuming a Trump win is confirmed, we expect to see initial sentiment hit across the renewable sector,” opined Citigroup Inc. analyst Jenny Ping. “We expect to see some differentiation between renewable technologies, with those exposed to offshore wind potentially more at risk.”
Emerging economies have also seen rapid reaction to the likelihood of a Trump win, with Asian stocks and currencies including the Japanese yen taking a hit. With a tough stance on China and tariffs on the agenda, markets view Trump as a risk for EMs. The lira was an outlier overnight with hedge funds among the investors favoring the Turkish currency.
European market analysts are also expecting a negative impact from a Trump administration. Andrzej Szczepaniak, European economist at Nomura told Reuters what he expects.
"Trump’s universal tariffs plan is expected to have a substantial impact on the already fragile Eurozone economy, while the inflationary effects for Europe will be more limited,” he said. “This could trigger an even more accelerated rate cutting cycle path from the ECB and will likely lead to a greater divergence between the US and European policy rates."
This is an evolving story and InvestmentNews will have further coverage later.
