S&P 500 Hits All-Time Highs as Trump Wins Election: Markets Wrap

(Bloomberg) — Stocks hit all-time highs, bond yields jumped and the dollar was set for its best day since 2020, with investors mapping out Donald Trump’s return to the White House and what his policies will mean for markets.

The S&P 500 climbed about 2%, heading toward its 48th record this year, on bets the newly elected president will enact pro-growth policies that will boost Corporate America. A gauge of small caps rallied 4.7% amid speculation they will benefit from Trump’s protectionist stance, while wagers on lower taxes and reduced regulation lifted banks. Insurers focused on the Medicare market jumped on expectations the government will pay higher rates to companies that provide private versions of the US health program for seniors. Trump Media & Technology Group Corp. gained 10%.

Wall Street’s “fear gauge” — the VIX — tumbled the most since August to around 16. Trading on stocks spiked, with the S&P 500 volume 125% above the average of the past month. The Dow Jones Transportation Average jumped to a fresh high after a three-year drought of records, finally confirming the strength of its industrial counterpart. The breakout is a bullish sign to followers of an investing framework known as Dow Theory that says synchronized gains in both gauges portend better times ahead for the broad market.

Treasury yields climbed across the curve, with the move led by longer-term bonds — with traders slashing wagers on the scope of interest-rate cuts by the Federal Reserve. Investors have doubled down on bets for policies such as tax cuts and tariffs that could trigger price pressures. The moves also signal worries that Trump’s proposals will fuel the budget deficit and spur higher bond supply.

The dollar rose the most since March 2020, up against most major currencies. The euro sank 1.9%. The Mexican peso lost 1.3%. Bitcoin hit a record high. Commodities came under pressure, with gold and copper tumbling. Oil wavered.

“The biggest takeaway from last night is that we received certainty that the market craves,” said Ryan Grabinski at Strategas. “This will allow both business and consumer confidence to improve. Attention now should shift to the Fed meeting tomorrow. The 10-year is approaching the 4.5% level, that’s the level risk assets ran into some trouble in the last 24 months.”

The S&P 500 rose 1.9%. The Nasdaq 100 added 2%. The Dow Jones Industrial Average climbed 3.1%.

Treasury 10-year yields advanced 18 basis points to 4.45%. The Bloomberg Dollar Spot Index rose 1.4%

To Thierry Wizman at Macquarie, traders have to be mindful about pushing the “yield story much further.”

“If there’s a surprise coming from Trump in the next few months (at least relative to hyped-up expectations), it will be about fiscal restraint, rather than fiscal irresponsibility. When the market realizes this, long-term UST yields could stabilize or decline.”

With many investors braced for a prolonged period of uncertainty, simply gaining some clarity on the outcome is providing a sigh of relief, according to Keith Lerner at Truist. He says the market currently appears more focused on the positive aspects of Trump’s agenda with less emphasis on the potential of tariffs and wider policy outcomes.

“Markets are pricing in most of the positives today, though the backdrop is complex, and rates, deficit concerns, the potential for fewer Fed rate cuts, and tariffs could eventually provide a counterbalance to today’s upside price shock, he noted. “Still, the weight of the evidence in our work indicates the bull market still has some longevity left, and we are sticking with the primary market uptrend.”

Fed officials are widely expected to lower their benchmark interest rate on Thursday by a quarter percentage point, a move that will come on the heels of a half-point cut in September. They have projected one more quarter-point cut this year, in December, and an additional full point of reductions in 2025, according to the median estimate released in September.

Policymakers, however, may now approach the question of when and how much to cut more cautiously as they assess how Trump’s economic proposals will be turned into actual policies, said Derek Tang, an economist at LH Meyer/Monetary Policy Analytics.

The makeup of Congress will also be kew going forward.

Republicans won control of the US Senate amid a slew of victories by allies of Trump, giving the GOP powerful leverage in high-stakes tax and spending battles next year. Meantime, Democrats needs a net gain of just four House seats to wrest the slim majority from Republicans. But with several key races still too close to call — particularly in notoriously slow-counting California — it could be days before it’s clear which party has the majority.

“Assuming the House goes Republican, we expect that a Red Sweep outcome will play out in a similar fashion to the 2016 playbook but to a lesser degree given a more mature economic backdrop and higher equity valuations,” said Jeff Schulze at ClearBridge Investments. “Business animal spirits could be rekindled once again from Trump’s pro-business approach.”

Schulze says that which could lead to a more robust capital expenditures and investment environment. A more favorable corporate tax regime, full extension of the Tax Cuts and Jobs Act, and a lighter regulatory touch should outweigh the potential headwinds from increased tariffs and reduced immigration on corporate profits.

“We expect cyclical leadership (Financials, Consumer Discretionary, Industrials) to continue in the coming months as the market anticipates stronger economic growth and better earnings delivery from this cohort than is currently priced,” Schulze noted. “Value, small caps, and the equal-weighted S&P 500 Index have outperformed growth, large caps, and the cap-weighted S&P 500 since the soft June CPI print and we expect further upside in this trend as a result of the election.”

Key events this week:

Some of the main moves in markets:

Stocks

Currencies

Cryptocurrencies

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Lu Wang.

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