The "Trump Trade" Returns as Dollar Soars, Bitcoin Hits New High, and Stocks Continue to Climb

The "Trump Trade" Returns as Dollar Soars, Bitcoin Hits New High, and Stocks Continue to ClimbEarly vote counts in the US election have fueled the "Trump trade," boosting the dollar to its biggest intraday gain in over two years, sending Bitcoin to a record high, lifting stocks further, and driving up US Treasury yields. These market movements largely reflect expectations of a Republican victory

The "Trump Trade" Returns as Dollar Soars, Bitcoin Hits New High, and Stocks Continue to Climb

Early vote counts in the US election have fueled the "Trump trade," boosting the dollar to its biggest intraday gain in over two years, sending Bitcoin to a record high, lifting stocks further, and driving up US Treasury yields. These market movements largely reflect expectations of a Republican victory. With over two-thirds of US states reporting, S&P 500 futures are up 1.3%, and the 10-year Treasury yield has climbed 17 basis points to a four-month high of 4.44%.

While voting is still underway, the odds of former President Trump winning are climbing in betting markets and on national prediction websites like DecisionDeskHQ. The market reactions to the "Trump trade" are mainly seen in these areas:

Significant Dollar Surge: The dollar index rose over 1.5% at one point, marking its strongest intraday gain in over two years. Market participants broadly anticipate Trump's policies to be dollar-friendly, including tax cuts, regulatory easing, and aggressive trade policies.

Continued Stock Market Gains: S&P 500 futures are up 1.3%, and Nasdaq 100 futures are up 1.5%. Markets perceive a Republican win as beneficial for stocks, especially those reliant on US economic growth.

Soaring Treasury Yields: The 10-year Treasury yield has climbed 17 basis points to a four-month high of 4.44%. Market expectations of a Republican victory have fueled optimism about US economic growth, leading to decreased demand for US Treasuries and subsequently rising yields.

Bitcoin Hits Record High: Bitcoin prices broke through their all-time high, surpassing $21,000 at some point. The market views Bitcoin as a safe haven asset that could exhibit strong resilience during periods of political uncertainty.

Emerging Market Currencies Under Pressure: The Mexican peso plunged almost 3% to a two-year low, leading the decline in emerging market currencies. The Japanese yen dropped 1.6%, topping the losses among G-10 currencies; the euro, pound sterling, and Australian dollar all depreciated by over 1%. Markets are concerned that Trump's protectionist policies could negatively impact emerging market economies.

Small-Cap Stocks Rise: Given the Republican stance on protectionism, small-cap companies with typical domestic businesses are viewed as potential winners in a Republican victory scenario. Russell 2000 futures are up 3%.

Although vote counts are not yet final, the initial results have already significantly impacted markets. As the voting process continues, market volatility is likely to intensify. Investors need to keep a close eye on the vote counts and how markets react to those results.