Stocks rallied, Treasury yields surged, and the dollar posted its most significant rise since February 2023 as early returns fueled optimism around Donald Trump’s election prospects. With more than two-thirds of states reporting, S&P 500 futures climbed 1.3%, U.S. 10-year Treasury yields jumped 17 basis points to a four-month peak of 4.44%, and Bitcoin hit a record high—signals of market momentum favoring a Republican victory. As polling continued in nine states, the former president’s chances of winning were rising, according to betting markets and forecasting sites like Decision Desk HQ.
In global markets, equities in Japan and Australia saw gains, while Hong Kong stocks edged lower. The Bloomberg Dollar Spot Index rose 1.4%, reflecting a surge in haven demand and a return to positions anticipated to benefit from tax cuts and tariff hikes under a potential Trump administration. The Mexican peso tumbled by 2.8%, and the Japanese yen and euro both weakened by more than 1.7%. Meanwhile, Russell 2000 futures gained 3%, reflecting the bullish sentiment surrounding smaller, domestic-focused companies, which are perceived as likely beneficiaries in a protectionist Republican-led economy.
A range of assets sensitive to Trump’s policy proposals saw notable shifts, particularly the dollar, which strengthened amid expectations of tariff increases, and bond yields, which rose in anticipation of Trump’s fiscal policies that could widen the $1.8 trillion U.S. budget deficit. Cryptocurrencies, meanwhile, rallied due to expectations of relaxed regulation, buoyed by Trump’s public support for digital currencies.
Among individual stocks, Trump Media & Technology Group surged more than 25% before trimming some of its gains. Tesla Inc. also saw a boost, benefiting from a unique position where its prospects could improve regardless of the election’s outcome. While the company could benefit from a Democratic win, thanks to the party’s support for electric vehicles, Tesla also stands to gain from a Republican victory given Elon Musk’s strong backing of Trump.
As the election race between Kamala Harris and Donald Trump tightened, early results showed Trump holding leads in key swing states like Georgia and North Carolina. Vote counting was still underway in other critical areas, suggesting the outcome could take days to determine.
“It’s still very early, and we expect some volatility as the results continue to come in,” said Keith Lerner, chief market strategist at Truist. “That said, several betting markets are showing a sharp rise in Trump’s odds, and we’re seeing the impact on trades tied to his potential victory—small caps, cryptocurrencies, and even Trump Media are getting a boost. However, we still have a long night ahead.”
In contrast to the relatively muted market activity earlier on Tuesday, Wall Street was bracing for potentially large swings regardless of the outcome. Goldman Sachs Group’s trading desk suggested that a Republican sweep could push the S&P 500 up by 3%, while a Democratic victory could lead to a similar-sized pullback. A divided government, however, would likely produce more modest moves. JPMorgan’s Andrew Tyler noted that anything short of a Democratic sweep would likely send stocks higher.
Morgan Stanley analysts forecast that a Republican sweep might dampen risk appetite in the short term, as rising yields could stoke fiscal concerns. However, if bond markets absorb the impact smoothly, growth-sensitive stocks, particularly in the cyclical sectors, could rise. On the other hand, renewable energy companies and consumer stocks vulnerable to tariffs would likely outperform if Harris wins, with a divided Congress offering a favorable backdrop for these sectors. A corresponding decline in yields would likely benefit housing-related industries.
Overall, investors are closely watching the unfolding election results, with major market moves expected to continue through the night as the race remains too close to call.
Related topics:
