U.S. equities surged to unprecedented levels on Wednesday following Republican Donald Trump’s victory in the 2024 U.S. presidential election, marking a remarkable return four years after he was ousted from the White House.
The Dow Industrials, S&P 500, and Nasdaq Composite all reached all-time highs as investors anticipated reductions in taxes, less regulation, and a U.S. leader who is unreserved in commenting on issues from the stock market to the dollar, although new tariffs could pose challenges in terms of a higher deficit and inflation.
The Republican’s victory sparked a surge in what are known as “Trump trades,” driving U.S. Treasury yields significantly higher. Bitcoin soared to a record high exceeding $75,000, and the dollar was set for its largest one-day percentage increase since September 2022.
Polling suggested a closely contested race, with concerns that the outcome could be delayed before a winner was announced.
“The clarity of the result, with no messy disputes or legal challenges anticipated, is a reassuring factor for the markets,” remarked Ross Mayfield, an investment strategy analyst at Baird in Louisville, Kentucky.
“This effectively supercharges the classic Trump trade we experienced in 2016 as well.”
The Dow Jones Industrial Average climbed 1,450.11 points, or 3.43%, finishing at 43,671.12, while the S&P 500 increased by 138.27 points, or 2.39%, to 5,920.87, and the Nasdaq Composite rose by 514.26 points, or 2.78%, to 18,953.43.
Both the Dow and S&P 500 were on track to achieve their largest one-day percentage increases since November 2022, with the Nasdaq set for its most significant daily rise since August.
Financials, which soared nearly 6%, emerged as the top-performing sector among the 11 major S&P 500 categories. Banks, expected to thrive under Trump’s relaxed regulations, were a driving force behind the gains, with the S&P 500 bank index rising approximately 10%, its largest daily increase in two years.
The Russell 2000, representing small-cap stocks, surged over 5% to a three-year peak, with these domestically focused shares perceived as likely to benefit from looser regulations, reduced taxes, and diminished exposure to import tariffs. However, rising Treasury yields could pose challenges for smaller firms that typically depend heavily on borrowing and are more sensitive to increasing interest rates.
The CBOE Volatility Index, often referred to as Wall Street’s “Fear Gauge,” fell more than 4 points to 16.37 after hitting a six-week low of 15.44.
The interest-sensitive real estate and utilities sectors were among the day’s few losers as investors evaluated the potential for Trump’s policies to drive inflation and affect the Federal Reserve’s interest rate trajectory, which has been crucial to Wall Street’s recent gains.
The central bank is broadly anticipated to lower the benchmark interest rate by 25 basis points at its upcoming policy meeting concluding on Thursday. Nonetheless, traders have started to scale back expectations for a cut in December as well as the anticipated number of reductions for the following year, according to CME’s FedWatch Tool.
Stocks considered likely to thrive under another Trump term also rose, with Trump Media & Technology Group gaining about 3% and Tesla surging approximately 14% as CEO Elon Musk has shown support for Trump during his campaign.
Strong advances were also observed in shares of cryptocurrency firms, energy companies, and prison operators, while renewable energy stocks declined.
Markets were additionally focused on whether the Republican Party could retain a majority in the House of Representatives after reclaiming control of the U.S. Senate, which would result in less resistance to a Trump agenda.
Both stock futures and Treasury yields spiked immediately as the results emerged, the apparent clarity of which eased concerns over prolonged political and legal disputes regarding contested ballots.
Small-cap stocks encompassed by the Russell 2000 have thus far emerged as the top equity index performers, jumping almost 6% before Wednesday’s closing bell.
The outcome of the House may now determine the potential for further bond market declines moving forward, with the ongoing possibility of a ‘Red sweep’ highlighting tax cut speculations.
