"Trump Trade" Explodes After Trump's Election Win, US Stocks Hit Record Highs, Dollar Surges, Gold Plunges

"Trump Trade" Explodes After Trump's Election Win, US Stocks Hit Record Highs, Dollar Surges, Gold PlungesDonald Trump's victory in the US presidential election sparked a dramatic market swing, with a "Trump Trade" reaction swiftly emerging. All three major US stock indices closed at record highs on Wednesday, with the Dow Jones Industrial Average soaring over 1,550 points, its best two-day gain in two years

"Trump Trade" Explodes After Trump's Election Win, US Stocks Hit Record Highs, Dollar Surges, Gold Plunges

Donald Trump's victory in the US presidential election sparked a dramatic market swing, with a "Trump Trade" reaction swiftly emerging. All three major US stock indices closed at record highs on Wednesday, with the Dow Jones Industrial Average soaring over 1,550 points, its best two-day gain in two years. The Russell 2000 small-cap index led the surge, up over 5.8%. Tesla surged nearly 15% to a two-year high, while Trump Media Technologies climbed over 34.8% before closing up nearly 6%, at one point triggering a trading halt. Expectations of regulatory loosening boosted energy, steel, and cryptocurrency stocks, with the Philadelphia Bank Index closing up over 10%.

Responding to Trump's victory, the US Dollar Index (DXY) surged, reaching a four-month high above 105. The Japanese yen fell over 1.9%, nearing 155 and hitting a three-month low. The offshore yuan fell over 1,000 points, dipping below 7.20 for the first time in over three months. The euro fell over 1.8%, heading towards its worst day in over four years, reaching a multi-month low.

On the other hand, gold suffered a severe decline, experiencing its largest single-day drop in five months. Prices fell over 3% at their lowest point, dipping below $2,660 to a three-week low. Spot silver fell nearly 5.6% at its lowest point in over three weeks.

The emergence of the "Trump Trade" signifies market anticipation for Trump's policies. Analysts generally believe that a Republican-controlled White House and Congress will lead to significant changes in spending and tax policies, ultimately benefiting US economic growth. Trump has promised to implement policies like tax cuts and increased infrastructure investment, which are expected to stimulate economic growth and drive corporate earnings higher.

However, Trump's policies have also sparked concerns about inflation, pushing the dollar and US Treasury yields higher, while weighing on commodities. Gold, silver, copper, and oil all declined. Concerns about Trump's tariff plans put pressure on European stocks, with European Central Bank Vice President Luis de Guindos saying that if the US implemented its tariffs, it could have a "devastating" impact on global growth and inflation.

While Goldman Sachs expects the ECB to increase its rate cuts, and October's final readings for the Eurozone composite and services PMI both revised upwards, remaining above the 50-point threshold and indicating expansion, Trump's victory overall adds to the risks facing the global economy.

Beyond the "Trump Trade" igniting the market, investors are also keenly focused on the Federal Reserve's monetary policy decision scheduled for Thursday. The explosive growth of the "Trump Trade" propelled the three major US stock indices to record highs, with Tesla, Trump Media Technologies (DJT), prison stocks, energy stocks, cryptocurrency-related stocks, and bank stocks all rallying significantly. Solar stocks plummeted, while Chinese stocks generally retreated but saw their losses narrow in the final hours.

Concerns about Trump's tariff plans are putting pressure on European stocks. Inflation concerns stoked by Trump's policies are pushing the dollar and US Treasury yields higher, weighing on commodities as gold, silver, copper, and oil all decline. Bitcoin futures broke through $77,000, hitting an all-time high. Expectations for Fed rate cuts have plummeted, with the market now expecting only 57 basis points worth of rate cuts in 2025. The total rate cut expectation from now until the end of 2025 is less than 100 basis points (less than four 25-basis point rate cuts). JPMorgan Chase expects the Fed to implement a single rate cut per quarter starting in March 2025. Nomura economists predict the Fed will likely implement only one rate cut in 2025 and have raised their terminal rate forecast by 50 basis points to 3.625%. They anticipate that Trump will increase tariffs, which will boost inflation in the short term and lead to a moderate slowdown in growth.

Trump's tariff policies have sparked global inflation concerns, with European Central Bank Vice President Luis de Guindos stating that the implementation of these policies could have a "devastating" impact on global growth and inflation. European Central Bank Governing Council member and Bank of France Governor Franois Villeroy de Galhau said that Trump's victory adds to the risks facing the global economy. However, Goldman Sachs expects the ECB to increase its rate cuts, and the final readings for the Eurozone composite and services PMI for October both revised upwards, remaining above the 50-point threshold and indicating expansion. Expectations for rate cuts have plummeted, with the market now expecting only 57 basis points worth of rate cuts in 2025. The total rate cut expectation from now until the end of 2025 is less than 100 basis points (less than four 25-basis point rate cuts).

On Wednesday, November 6, Trump declared victory, and the "Trump Trade" exploded, propelling the S&P 500, Nasdaq, and Dow Jones to record highs. The Dow Jones soared over 1,550 points, its best two-day gain in two years, while the Russell 2000 small-cap index led the surge, up over 5.8%. Tesla surged nearly 15% to a two-year high, while Trump Media Technologies climbed over 34.8% before closing up nearly 6%, at one point triggering a trading halt. Expectations of regulatory loosening boosted energy, steel, and cryptocurrency stocks, with the Philadelphia Bank Index closing up over 10%.

Solar stocks plummeted, while Chinese stocks saw their losses narrow in the final hours: The three major US stock indices all rallied. The S&P 500 gained 146.28 points, or 2.53%, to close at 5,929.04. The Dow Jones, closely tied to the economic cycle, rose 1,508.05 points, or 3.57%, to close at 43,729.93. The tech-heavy Nasdaq climbed 544.29 points, or 2.95%, to close at 18,983.47. The Nasdaq 100 gained 2.74%. The Nasdaq Technology Sector Value Weighted Index (NDXTMC), a measure of the performance of technology companies in the Nasdaq 100, gained 2.65%. The Russell 2000 small-cap index, more sensitive to economic cycles, closed with a gain of 5.84%. The VIX volatility index closed down 20.11%, ending the day at 16.37. The S&P 500's 2.53% gain is the largest post-election day gain in history.

Most industry ETFs closed higher. Regional bank ETFs climbed over 13%, bank ETFs rose nearly 12%, financial ETFs gained over 6%, airline ETFs rose over 5%, energy ETFs, consumer discretionary ETFs, and internet stock index ETFs each gained at least 3%, while healthcare ETFs and semiconductor ETFs each gained at least 2.5%. However, consumer staples and utilities ETFs both fell over 1%.

Most of the 11 sectors in the S&P 500 index closed higher. Financials gained 6.16%, industrials, consumer discretionary, and energy each rose by at least 3.5%, technology gained 2.52%, and telecommunications rose roughly 2.4%. However, consumer staples fell nearly 1.6%, and real estate declined over 2.6%.

In terms of investment strategies, Vincent Juvyns, global market strategist at Morgan Asset Management, believes that Trump's election victory will likely benefit a wide range of industries and domestic companies through tax cuts and fiscal measures. This could lead to the US stock market's rally expanding from technology and blue-chip stocks to other sectors, particularly small-cap stocks.

The "Magnificent Seven" technology stocks saw mixed performance. Tesla gained 14.75%, Alphabet (Google) A shares rose 3.99%, Nvidia rose 4.07% to a new high, continuing to surpass Apple as the world's most valuable company. Microsoft climbed 2.12%, Amazon gained 3.8% to a record high. Apple fell 0.33%. Meta fell 0.07%.

Tesla shares closed up nearly 15%, their highest level since July 2023.

Most chip stocks rose. The Philadelphia Semiconductor Index gained 3.12%. SOXX, an industry ETF, gained 2.92%. The 2x Leveraged ETF for Nvidia gained 8.08%. AMD gained 2.43%, Broadcom rose 3.25%, and ON Semiconductor gained 2.95%. Arm Holdings gained 2.87%, Micron Technology climbed 6.01%, and Intel gained 7.42%. Qualcomm rose 4.27%, with its stronger-than