(Bloomberg) — Donald Trump’s rising presidential prospects rippled through global markets on Wednesday, with US stock futures gaining, Treasury yields jumping and the dollar surging the most since March 2020.
S&P 500 futures climbed 1.2%, 10-year yields rose as much as 19 basis points to a four-month high of 4.47% and Bitcoin spiked to a record – moves that reflect rising wagers on a Trump presidency, with Vice President Kamala Harris’s path to victory narrowing. The latest results showed Trump won both North Carolina and Georgia and Republicans gained control of the US Senate.
The Bloomberg Dollar Spot Index was up as much as 1.6%. The Mexican peso slumped over 3%, while the Japanese yen and the euro slid at least 1.5%. Contracts on the Russell 2000 Index added 2.4%. Smaller companies with typically domestic operations are seen as potential gainers in a Republican win, given the party’s protectionist stance. Trump Media & Technology Group Corp. surged in trading on Robinhood Markets Inc.’s 24-hour platform.
The prospect of a Trump victory fueled jitters in some Asian markets, with the offshore yuan sliding along with shares in Hong Kong as investors factored in a possible increase in trade tensions. European stock futures fell on concerns export-reliant industries could also be hit by tariffs.
A cohort of investors on Wall Street have wagered that Trump’s stance on industrial policy, corporate tax cuts and tariffs would boost stocks and could fuel inflation — spurring bond yields and the US dollar higher. Crypto is seen as benefiting from relaxed regulation and Trump’s public support for the digital currency.
“Harris’ path to victory is now looking increasingly difficult and markets seem to be piling into the Trump trades completely evident in a higher USD, higher Bitcoin and pressures on JPY, EUR and MXN,” said Charu Chanana, chief investment strategist at Saxo Markets. The market is also now “signaling the a Trump trade may have been priced in and worries about the Congress split could be next.”
In contrast to Tuesday’s relatively calm session, Wall Street saw the potential for outsized moves almost regardless of the election’s outcome.
Goldman Sachs Group Inc.’s trading desk said a Republican sweep may push the S&P 500 up by 3%, while a decline of the same size is possible should the Democrats win both the presidency and Congress. Moves would be half as much in the event of a divided government. Andrew Tyler at JPMorgan Securities said anything other than a Democratic sweep is likely to cause stocks to rise.
A Morgan Stanley note says risk-taking appetite may dip in the event of a Republican sweep as fiscal concerns fuel yields, but if bond markets take it in their stride the likes of growth-sensitive cyclical stocks would rise. Meanwhile, it sees renewable-energy firms and tariff-exposed consumer stocks rallying under a scenario in which Harris emerges the victor with a divided Congress, while a corresponding fall in yields would benefit housing-sensitive sectors.
Here’s What Wall Street Says:
The notable and expected events if we have a Trump win is a weaker yen, falling Chinese equities, Japanese stocks outperforming emerging Asia.
If there is a Trump win and a Republican sweep indeed, the combination of stronger USD and stronger UST yields is negative for Asia assets, a stronger S&P is positive. Taiwan is well placed on the short term.
While some equity market volatility this week is inevitable, we do not expect the likeliest election outcomes to change our 12-month view on US equities. We expect the S&P 500 to rise to 6,600 by the end of 2025, driven by our expectations of benign US growth, lower interest rates, and the continued structural tailwind from AI. We expect these market drivers to remain in place regardless of who wins the US election.
Our 10-year yield forecast is 3.5% for June 2025. While we would expect yields to land somewhat higher than 3.5% under a Trump presidency, we would still anticipate positive returns for bonds over the coming 12 months. We do not expect the election result to shift the Fed from a path toward lower interest rates, and inflation remains on a downward trajectory.
We would expect the dollar to be somewhat stronger under Trump than Harris. More pro-growth policies, likely higher interest rates, and tariffs could all provide tailwinds for the dollar.
Our historical playbook analysis reminds us that the S&P 500 tends to rise regardless of the balance of power in Washington.
The strongest backdrops have tended to be a Democratic Presidency with a split or Republican Congress, and Republicans controlling the White House along with both chambers of Congress. In this context, we are more focused on longer-term opportunities that may open up from big gaps up or down around the event rather than short-term trades.
Investors should look past the election and focus on the fundamentals of what drives markets. The economy and earnings continue to be better than expected, most stocks are reasonably priced and the Fed is in an accommodative mode and is expected to cut interest rates again this week. There is an excellent backdrop for stocks right now.
We view a Trump win, likely coming in a sweep scenario, as net positive for equities as it preserves favorable corporate tax treatment and builds on tax elements that expired. A Harris win, likely coming with a divided Congress, would be mildly negative due to fewer provisions of expiring tax legislation getting extended due to political gridlock.
First off, we would simply tell investors not to overreact.
We believe we are set for a strong end-of-year rally for many reasons, two of which are a possible case scenario by the bears who finally have to capitulate, and performance anxiety from large money managers who may have missed the big moves in certain names.
We do believe the market prefers Trump for lower taxes and less regulation, and with Kamala, we likely see higher taxes and more regulation, but again with the balance of power, we may not see many of their proposed policies go into effect.
Key events this week:
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Eurozone HCOB Services PMI, PPI, Wednesday
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China trade, forex reserves, Thursday
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UK BOE rate decision, Thursday
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US Fed rate decision, Thursday
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US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures rose 1.2% as of 6:07 a.m. London time
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Nikkei 225 futures (OSE) rose 2%
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S&P/ASX 200 futures rose 0.7%
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Japan’s Topix rose 1.9%
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Hong Kong’s Hang Seng fell 2%
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The Shanghai Composite rose 0.4%
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Euro Stoxx 50 futures fell 0.8%
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Nasdaq 100 futures rose 1.2%
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Australia’s S&P/ASX 200 rose 0.8%
Currencies
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The Bloomberg Dollar Spot Index rose 1.4%
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The euro fell 1.7% to $1.0745
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The Japanese yen fell 1.5% to 153.92 per dollar
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The offshore yuan fell 1.2% to 7.1834 per dollar
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The Australian dollar fell 1.4% to $0.6543
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The British pound fell 1.2% to $1.2881
Cryptocurrencies
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Bitcoin rose 8% to $74,711.13
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Ether rose 7.4% to $2,595.02
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Vildana Hajric, Richard Henderson, Shikhar Balwani, Carter Johnson, Sydney Maki, Michael Mackenzie, John Cheng and Winnie Hsu.
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