U.S. stocks surged on Wednesday following a decisive victory for former President Donald Trump in the U.S. presidential election.
The rally began in premarket trading and continued throughout the day, with the Dow jumping 1,507 points (3.57%) to a record high, marking its first 1,000-point gain since November 2022.
Both the S&P 500 and Nasdaq also hit new highs, rising 2.5% and 2.95%, respectively.
The U.S. dollar posted its best performance in two years, while Treasury yields also increased.
Markets were buoyed by the swift resolution of the election, which alleviated concerns about prolonged uncertainty. This clarity allowed businesses to adjust their plans.
The market responded positively to Trump’s victory, particularly due to his success in flipping key swing states and Republicans gaining control of the Senate. Investors saw this as an opportunity for deregulation and pro-business policies.
Despite the upbeat market response, analysts caution that the uncertainty around policy execution could become more pronounced in 2025.
Historically, the market has performed better under Democratic presidencies, but Trump’s business-friendly policies could create favorable conditions for investors.
Trump’s proposed policies, such as tax cuts and increased public spending, could increase the U.S. budget deficit and lead to higher Treasury yields, which are counterproductive to the Federal Reserve’s goal of lowering interest rates.
As bond yields rise, consumer loan rates, including mortgages and credit cards, could also remain high.
Stocks in sectors like social media (Trump Media & Technology Group) and banking saw significant gains, while Tesla’s stock surged due to speculation about Musk’s future relationship with the Trump administration.
Global markets reacted differently: European stocks underperformed compared to the U.S., while Japanese equities rose, and Chinese stocks struggled amid expectations of higher tariffs on U.S.-China trade.
