US stock futures rose sharply early Wednesday, as presidential election results pointed to a possible victory for Donald Trump and Republican control of the Senate.
Reliable Republican and Democratic states have fallen into Trump and Kamala Harris’ columns. But the swing states of Pennsylvania, North Carolina and Georgia were called for Trump, putting him on the cusp of victory. Prediction markets are already pricing Trump’s odds of winning at nearly 100%.
The Dow Jones Industrial Average rose 956 points, or 2.2%, while the S&P 500 rose 1.9% and the Nasdaq added 1.7%.
The so-called Trump trade rebounded after falling on Tuesday and Monday. The US currency rose, with the US dollar index rising 1.5%. The 10-year Treasury yield jumped 10 basis points to 4.38%, and bitcoin rose 6% to $73,730 after briefly reaching $75,000.
These assets have followed Trump’s political outlook as his tariffs, tax cuts, and campaign against immigration are seen as inflationary, limiting the Fed’s ability to cut interest rates further, while he has also rebranded himself as a champion of the cryptocurrency sector.
Meanwhile, Trump Media and Technology shares rose 10% in after-hours trading after closing lower in the regular session amid choppy trading. Tesla rose 3.5%, as CEO Elon Musk has been a major supporter of Trump, while solar stocks fell as renewable energy stocks could see a decline in climate initiatives.
Overseas markets are watching the final hours of the US elections with caution, as the next president could have a significant impact on the global economy, especially on trade. Trump pledged to raise tariffs across the board, with higher tariffs on China in particular. On Monday, he threatened to impose a 25% tariff on imports from Mexico unless it closes its border with the United States — and to increase the tariff by up to 100% if it does not comply.
In China, the Shanghai SSE Composite Index fell by 0.1%. In Japan, the Nikkei 225 index jumped 2.6% as the yen fell against the dollar, making its exports cheaper. Earlier in Europe, the Stoxx 50 rose 0.4% while the Stoxx Europe 600 gained less than 0.1%.
Other races are also crucial, as the party that controls Congress will also determine how much discretion the next president has to enact policies. Republicans have flipped the Senate, while the outcome for the House remains unclear. Separately, the Federal Reserve concludes its policy meeting on Thursday, with interest rates expected to fall by 25 basis points.
Trump Economy vs. Harris Economy
Under another Trump administration, investors expect less regulation from the federal government. This should boost banking stocks, cryptocurrency stocks such as Coinbase, as well as companies in the oil and gas sector.
He also threatened to undo President Joe Biden’s signature policies, including those encouraging renewable energy and electric vehicles. Trump’s promise to limit immigration and launch a mass deportation campaign also lifted shares of prison operators Geo Group and CoreCivic.
The Harris administration is largely seen as providing more continuity with the Biden administration, maintaining policies that promote green energy and infrastructure. It also revealed plans to encourage more housing supply, which could benefit homebuilder stocks.
Their different stances on taxes will also affect corporate profits, personal income, and stocks. Trump promised to extend tax cuts starting from his first term and reduce interest rates on companies. It also sparked a slew of repeals, including taxes on tips, overtime pay and Social Security payments, as well as exemptions for the military, veterans and first responders. He even considered eliminating income taxes altogether.
Harris has supported extending Trump’s tax cuts to Americans earning less than $400,000, but not to the rich. She also pledged to raise corporate interest rates and force the wealthy to pay taxes on unrealized capital gains, while expanding child tax credits and giving tax breaks to small businesses.
The next president faces huge US debt
Whoever the next president is, he will likely face a reckoning over the United States’ growing debt and deficit.
But this may come sooner under the Trump administration. Budget watchdogs have warned of a worsening federal deficit. While it will expand under Trump or Harris,… Penn Wharton budget model The Committee for a Responsible Federal Budget said Trump’s policies would create a much deeper divide. Trump ally Elon Musk said he could cut federal spending by $2 trillion, but… Skeptics point out that this is unlikely without draining entitlements and the military Or destroy the economy
Neither candidate made deficit reduction a priority during the election campaign, but financial markets may impose this issue. “Bond vigilantes,” or investors who protest massive deficits by selling bonds to push yields higher, have already begun to influence elections, according to Ed Yardeni, the Wall Street veteran who coined the term in the 1980s.
As the Treasury sells larger amounts of debt at auctions to fund the federal government’s ocean of red ink, bond investors may balk, leading to higher interest rates and increased borrowing costs across key sectors of the economy, such as mortgage rates.
“Bond vigilantes may also be voting against Washington, believing that no matter which party wins the White House and Congress, fiscal policies will swell the federal government’s already ballooning budget deficits and lead to higher inflation,” Yardeni and his colleague Eric Wallerstein wrote last month. . “The next administration will face net interest expenditures of more than $1 trillion on ballooning federal debt.”
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