Stocks Surge on Trump Re-Election | Chief Investment Officer

U.S. equities surged higher, bond yields rose, and gold and silver dropped on Wednesday, as markets absorb the news from Tuesday’s election.

At midday, the Dow was up 1,320.22 points, the Nasdaq had risen 439.30 points and the S&P 500 jumped 120.58 points, while the Russell 2000 was up 101.94 points and the FT Wilshire 5000 Index climbed 1,322.33.

Conversely, Treasurys sold off due to concerns about how the policies of the administration of President-elect Donald Trump are expected to widen the federal budget deficit and drive inflation higher again. Long-dated Treasurys lead the rout, with the 30-year yield jumping the most since March 2020, according to Bloomberg News.

Andrzej Skiba, head of BlueBay U.S. fixed income at RBC Global Asset Management, said in a statement: “These election results will be really bad for fixed income and can unwind a lot of the bullishness in fixed income. Trump keeps openly telling people that he will increase tariffs, not just on China, but with every trade partner. We’re talking 10% tariffs across all global partners. This is a big deal because this could add 1% to inflation. If you add 1% to next year’s inflation numbers, we should say bye to rate cuts.”

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According to the BlackRock Investment Institute, the election results indicate a significant U.S. policy shift to come, including chances for “sticky inflation and higher-for-longer interest rates.”

Noting that control of the House of Representatives is not yet determined, BlackRock’s report on the possible changes to come noted, “control of the House would give a second Trump administration broader powers to enact its tax, energy, trade and regulatory agenda.”

Jeff Schulze, head of economic and market strategy at ClearBridge Investments, said in a statement that Trump’s pro-business approach “could lead to a more robust capital expenditures and investment environment. A more favorable corporate tax regime, full extension of the Tax Cuts and Jobs Act, and a lighter regulatory touch should outweigh the potential headwinds from increased tariffs and reduced immigration on corporate profits.”

In an interview with CIO which occurred before the election, Conning North America CIO Cindy Beaulieu noted that no matter who wins the election, federal spending would likely stay heightened. Alonso Munoz, CIO and partner at Hamilton Capital Partners agrees.

“It is likely that the Federal Government maintains its high spending propensity, especially if the President-elect enacts tax cuts, or extends some, or all, of the 2017 TCJA with the support of the Republican Senate and House,” Munoz said in a statement. “The balance of risks has shifted over the last few months, as economic data (specifically within the jobs market), has softened. We examined pockets of weakness in the Fed’s Beige Book, and manufacturing has continued to struggle broadly. Interestingly, consumer confidence has rebounded, and inflation measures have risen slightly in recent prints.”

Other market watchers, including the American Securities Association, have focused on the potential for reduced regulation. The ASA called on Securities and Exchange Commission Chairman Gary Gensler to immediately step down.

Bob Elliott, CEO and CIO of Unlimited Funds, says a new regulatory environment would be more accommodative to mergers and acquisitions.

Adam Turnquist, chief technical strategist at LPL Financial, noted the election’s impact on the strength of the dollar.

“Trump’s election victory sparked a rally in the greenback last night as growth and inflation expectations rerated higher,” Turnquist said in a statement. “Fed funds futures dialed back rate cut expectations from five to four 0.25% cuts by the end of next year. Yields surged higher, a move further exacerbated by deficit spending concerns, especially if Republicans secure the House.”

Sylvia Jablonski, CEO and CIO of Defiance ETFs, noted in an email that equities could continue their strength into the future.

“Although we have a winner, all of these other factors like political polarization, geopolitics, the configuration of Congress, and the economic climate could change everything,” Jablonski wrote. “The economy is good … the U.S. dollar will get stronger, manufacturing is strong, and there are a lot of reasons to be long equities regardless of what the outcome was, but the outcome may help in terms of corporate tax cuts and less regulation typically favorable for business operations.”