Stocks, Dollar, and Bitcoin Soar as Trump Eyes Re-election, Market Anticipates Economic Boost

Investor Optimism Rises Amid Pro-Business Policy Expectations and Reduced Uncertainty

As former President Donald Trump appeared poised for victory in the crucial battleground states of Pennsylvania, Georgia, and North Carolina, US stock futures surged early Wednesday, reflecting investors’ mounting optimism. Trump’s success in these states would significantly narrow Vice President Kamala Harris’ paths to victory, fueling market confidence in a decisive outcome. Futures on the Dow climbed 2.84%, while the S&P 500 rose 2.2%, and the US dollar index reached its highest point since July.

The cryptocurrency market saw notable gains as well. Bitcoin soared past $75,000, reaching a new all-time high during early trading on Wednesday and breaking its previous peak of $74,000 set just one day earlier. Trump, who has recently expressed support for cryptocurrencies, may have further boosted confidence in the market. Dogecoin, the famously volatile cryptocurrency favored by Elon Musk, a high-profile Trump supporter, also surged by as much as 25% before settling with a 16% gain. Overall, Dogecoin has risen nearly 31% since the start of the week.

As Americans cast their votes, market indexes showed strong gains. On Tuesday, the Dow closed 425 points higher, up 1%, while the S&P 500 gained 1.2%, and the tech-heavy Nasdaq climbed 1.4%. Historically, Election Day has often been a positive one for US markets, and this year marks the sixth consecutive Election Day gain for the S&P 500 and Nasdaq.

Analysts and investors are attributing the market’s response to the prospect of Trump’s re-election and the pro-business policies his administration is expected to bring. Mark Haefele, Chief Investment Officer of UBS’s wealth management unit, noted that the surge in S&P 500 and Russell 2000 index futures reflects investor anticipation of a Trump presidency that would support domestic growth, mergers and acquisitions, and possibly extend personal tax cuts and lower corporate tax rates.

“The prospect of a clear-cut election outcome may also be driving futures higher, given reduced uncertainty about the future,” Haefele stated.

In other areas, Europe’s Stoxx 600 index rose 1.3%, with Germany’s DAX and France’s CAC indexes gaining 0.8% and 1.4%, respectively. London’s FTSE 100 traded 1.3% higher. According to Mohit Kumar, an economist at Jefferies, the promise of a Trump-led administration bodes well for financial and smaller-cap companies, which are poised for significant gains in the US stock market.

US markets have historically seen positive movement in the months following an election, regardless of its outcome. According to Adam Turnquist, Chief Technical Strategist for LPL Financial, “Most stock price movements over time are driven by earnings, inflation, and interest rates. Policy does matter, particularly tax and trade policy, but not as much as some might think.”

In the coming days, market volatility may increase as investors await the Federal Reserve’s latest interest rate decision, expected Thursday. This marks the Fed’s first rate announcement since its half-point rate cut. Amid new data suggesting a cooling US labor market, the announcement will add another layer of complexity to an already tumultuous week for investors.

As Trump’s election prospects appear increasingly favorable, financial markets are adjusting to expectations of a pro-business policy landscape, with reduced regulatory burdens and tax incentives. This potential environment is expected to support both large-cap stocks and smaller, domestically focused businesses, sustaining the current market momentum into 2024.