Wild moves in stock prices as Wall Street reacts to Trump victory – here's what it means for your 401(k)
Stocks were poised for a massive rally on Wednesday as investors react to Donald Trump‘s return to the White House.
Futures tied to the S&P 500 and the Dow rocketed to record highs on Wednesday morning. The Nasdaq, the third of the main indexes, was sharply up too.
Meanwhile, the small cap Russell 2000 soared a staggering 6.2 percent to its highest level since early 2022 as domestic-focused stocks expect to benefit from an easier regulatory and tax regime, as well as be less exposed to likely import tariffs.
It will mean big gains for investors of all kinds, including ordinary Americans with 401(k)s.
Wall Street markets open at 9.30am in New York, but so-called futures that track the main indices are traded around the clock and single stocks like Tesla see per-market action from 4am.
As votes added up, so-called Trump trades rallied, bitcoin hit a record high and the dollar gained. Shares in his X rival Truth Social jumped 37 percent.
Tesla, led by Trump ally Elon Musk, jumped 13 percent, while prison operators Geo Group and CoreCivic gained 30 percent and 22.4 percent, respectively.
Dow futures jumped more than 1,300 points, while those tracking the benchmark S&P 500 index crept closer to the psychologically significant 6,000 level. The Nasdaq composite future was 1.43 percent higher.
Stocks were poised for a booming rally on Wednesday as investors give their verdict after Republican Donald Trump reclaimed the US presidency
People pass the New York Stock Exchange in New York’s Financial District on Tuesday, Nov. 5, 2024. Stocks look set for a rally Wednesday morning after Donald Trump regained the presidency
Investors expect Trump’s victory to lead to faster economic growth and more market-friendly policies.
‘Markets absolutely crave certainty,’ said Dr. David Allen, portfolio manager, Plato Global Alpha Fund, adding that a Trump victory was likely ‘priced in at the margins’.
Futures tracking the small cap Russell 2000 soared 6.2 percent to their highest levels since early 2022 as domestic-focused stocks expect to benefit from an easier regulatory and tax regime, as well as be less exposed to likely import tariffs.
The price of bitcoin jumped nearly 8 percent to a record $75,345.00, as investors bet on a victory for Trump, who has pledged support for cryptocurrencies. It later fell back to $74,525.00.
Renewable energy shares fell.
Bond yields also surged, with the yield on the 10-year Treasury climbing to 4.4 percent from 4.28 percent on Tuesday.
Bank shares soared as yields – which give an indication of future interest rates – rose and investors expected them to benefit from less regulation.
JPMorgan Chase rose 6.7 percent, Bank of America added 6.9 percent, while the SPDR S&P Regional Banking ETF gained 8.9 percent.
‘The markets are scrambling to figure out what happens next, but for the time being, the market is pricing in a higher growth and higher inflation outlook,’ Peter Esho of Esho Capital said in a commentary.
The Republican party also gained control of the U.S. Senate, and posted early gains in the battle to maintain control in the House of Representatives.
A so-called ‘clean sweep’, in which one party captures the presidency, the House and the Senate would give Trump an easier route to push through desired legislation.
‘The big question for markets now is whether Trump’s win will bring full Republican control or a split government,’ said Russell Shor, senior market specialist at trading platform Tradu.
‘If Republicans take both chambers, Trump could have more room to cut corporate taxes-a potential boost for investor confidence.’
Trump was joined on stage by family – including daughter Ivanka and son-in-law Jared Kushner who had been absent from the campaign – aides and political supporters
The VIX, a measure of market volatility, dropped sharply to its lowest since September. Investors have been bracing for several days of uncertainty over who the winner of the presidency would be.
Wall Street analysts expect Trump’s plans for restricted immigration, tax cuts and sweeping tariffs to put upward pressure on inflation and bond yields, while corporations could benefit from his tax and regulatory policies.
Later in the day, the Federal Reserve will kick off its two-day meeting where the central bank is expected tomorrow to announce it will ease benchmark interest rate by 25 basis points.
However, bets on a December rate cut reduced slightly to 68% from nearly 80% on Monday, as per CME FedWatch.