Equities, currencies, and bonds react to Trump’s reelection

Markets react to Trump’s reelection: Donald Trump has been elected to his second nonconsecutive term at the White House leaving investors, traders, and policymakers speculating what that could mean for financial markets. The reaction to Trump’s win was immediate with equities, currencies, and bonds all seeing wild swings.

Want a recap of what went down yesterday? Yesterday’s issue of EnterprisePM Egypt dove into Trump’s victory and what we can expect from another four years of Trump in the White House. Check out the issue here.

Investor sentiment surged following Trump’s decisive win. “For now, investor sentiment is pro-growth, pro-deregulation, and pro-markets,” Bahnsen Group’s David Bahnsen told Bloomberg. “Finally, US stocks may see tailwinds from not only the election results but a retreat in volatility hedging, corporations moving out of their buyback blackout periods as the earnings season winds down, and strong fourth-quarter seasonality factors (particularly in election years),” said Ameriprise’s Anthony Saglimbene.

Stock markets hit record highs: US stocks soared to fresh highs — the S&P 500 climbed 2.5%, setting its 48th high of the year, the Dow Jones surged 3.6%, and the Nasdaq was up 2.7%. The Russell 2000 index of smaller companies outperformed all of its counterparts, rising 5.6% as investors banked on Trump’s stance in favor of domestically concentrated businesses.

The USD soars: The USD surged, posting its best one-day performance since 2022, with the Bloomberg USD Spot Index rising 1.3%. The greenback’s ascent sent major currencies reeling; the EUR fell 1.8%, marking its steepest one-day drop in over four years, while the JPY fell 1.9%. The GBP slipped 1.2%, marking broad pressure on non-USD currencies.

Not all is convinced the USD rally is here to stay: Trump’s policies on trade and tariffs are seen as “USD-positive,” Tradu’s analyst Nikos Tzabouras told Reuters. However, he argued that Trump “had essentially challenged the long standing strong USD mantra, because he prefers a weaker currency to help with exports and American economic activity,” which could temper this rally.

Bond markets brace for volatility: Treasury yields spiked, as investors reassessed the Federal Reserve’s path forward under Trump’s leadership. The 10-year Treasury yield hit its peak in five months, rising 21 basis points to 4.48%, driven by expectations of tax cuts and tariffs potentially triggering inflation.

Crypto rides the Trump wave: BTC soared nearly 9%, hitting a record high of over USD 76k as investors linked Trump’s victory to potential crypto-friendly policies. ETH followed suit, rising 10%. Trump’s support for digital assets during his campaign has fueled optimism in the sector, bolstering market confidence.

Mixed macro outlook as optimism meets caution: While markets are enjoying a wave of optimism, analysts caution that “the backdrop is complex.” Concerns about budget deficits, inflation, and fewer-than-expected Fed rate cuts are acting as counterbalances to the current bullish trend. Thierry Wizman at Macquarie advised traders to be mindful about pushing “the yield story much further,” as anticipated fiscal restraint could alter bond market dynamics.

The international press is abuzz with Trump’s victory and what it means for financial markets: Reuters | Bloomberg | FT | BBC | CNBC | NYT.

MARKETS THIS MORNING-

Asian markets are mixed in early trading this morning, as investors digest Trump’s reelection. The Nikkei is down 0.2%, while the Kospi is up 0.2%. The Shanghai is up 0.4% and Hang Seng is looking at gains of 0.8%.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.7% yesterday on turnover of SAR 7.6 bn. The index is up 1.1% YTD.

In the green: Al Baha (+10.0%), Teco (+6.3%) and Saudi Electricity (+6.3%).

In the red: Al Munajem (-7.8%), Wataniya (-4.3%) and SRMG (-3.7%).

THE CLOSING BELL: NOMU-

The NomuC rose +0.1% yesterday on turnover of SAR 106.8 mn. The index is up +17.6% YTD.

In the green: Shalfa (+30.0%), Mulkia (+7.8%) and Naba Al Saha (+6.8%).

In the red: Ghida Al Sultan (-7.6%), Taqat (-6.3%) and Purity (-5.4%)

CORPORATE ACTIONS-

Arabian Plastic Industrial Company’s BoD has recommended a 50% capital increase by way of granting bonus shares to shareholders, bringing its capitalization to SAR 75 mn, it said in a disclosure to Tadawul. The capital hike will be financed by capitalizing SAR 25 mn from the company’s retained earnings. Shareholders will receive one bonus share for every two shares they own and fractional shares will be sold in a rump offering, with proceeds distributed to shareholders on a pro rata basis, the disclosure read.

Shareholders of Abdulmohsen Al Hokair Group for Tourism and Development gave the green light for a rebranding to Baan Holding Group, it said in a disclosure to Tadawul.