‘Trump Trade’ Stocks and Crypto Soar on Historic Election Win

US financial markets rallied dramatically on Wednesday after Donald Trump’s victory in the 2024 Presidential election, as investors flooded into ‘Trump trade’ stocks and cryptocurrencies. The historic win prompted a broad surge, boosting major indices and pushing the value of Bitcoin (BTC) to an all-time high. Trump’s election win drove gains in ‘Trump trade’ sectors such as finance, energy, and crypto-related companies, aligning with investors’ expectations of a pro-business, low-regulation administration.

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Wall Street’s Response to Trump’s Policies

Stocks opened sharply higher on Wednesday, with the Dow Jones Industrial Average (DOWI) jumping 1,500 points, or 3.6%, while the S&P 500 Index (SPX) and NASDAQ Composite (NASX) also saw notable gains of 2.5% and 3%, respectively. The Russell 2000 Index (RUT), a benchmark for small-cap stocks, surged by more than 5%. The financial sector particularly benefited from the news, with large banks like JPMorgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), and Bank of America (NYSE: BAC) posting gains of 7% to 13%.

“The markets are scrambling to figure out what happens next, but for the time being, the market is pricing in a higher growth and higher inflation outlook,” observed Peter Esho of Esho Capital, adding that investors expect lighter regulation under Trump’s leadership.

Esho’s assessment reflects the prevailing sentiment that Trump’s policies will likely favor growth-oriented industries such as finance and energy, which surged on hopes for deregulation and tax cuts.

Trump’s promise to lower corporate taxes and ease regulatory constraints resonated with investors, who have long anticipated an administration that would foster economic growth through business-friendly measures.

Cryptocurrency Surge: Bitcoin Reaches Record Highs

Trump’s election win was also met with enthusiasm in the cryptocurrency market. Bitcoin (BTC), which has frequently tracked Trump’s political fortunes, rose to an all-time high above $76,000, breaking previous records. The surge reflects investor confidence that Trump will pursue a more accommodating stance toward digital assets.

During his campaign, Trump voiced support for the crypto sector, pledging to make the US a crypto superpower. His administration has also hinted at creating a national Bitcoin reserve and potentially replacing Securities and Exchange Commission (SEC) Chair Gary Gensler, who has led an aggressive regulatory approach toward crypto firms. These policy ideas have fueled optimism among crypto investors.

Attributing Bitcoin’s recent gains to increased clarity in the market’s direction, Meltem Demirors, general partner at Crucible Capital, noted:

“The asset largely tracked Trump’s betting odds 1-for-1 during the election cycle.”

Shares in crypto-related companies mirrored Bitcoin’s ascent, with notable increases in platforms such as Coinbase (NASDAQ: COIN), which gained more than 30%, and Robinhood (NASDAQ: HOOD), which rose by nearly 20%. Companies involved in cryptocurrency mining, including Marathon Digital (NASDAQ: MARA) and Riot Platforms (NASDAQ: RIOT), also experienced a strong uptick in share prices. The bullish outlook extended to Tesla (NASDAQ: TSLA), whose CEO Elon Musk has championed Bitcoin and voiced support for Trump’s policies. Tesla stock jumped 14%, benefiting from speculation that Trump’s administration may provide support for the electric vehicle industry.

View Bitcoin Interactive Stock Chart on Barchart

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Economic Impact and Inflation Concerns

Despite Wall Street’s upbeat reaction, Trump’s return to office has also prompted concerns over potential inflationary pressures. Investors worry that Trump’s proposals—such as implementing high tariffs on imported goods and cutting taxes—could exacerbate inflation, an issue the Federal Reserve has worked to control in recent years.

The 10-year US Treasury yield rose significantly to 4.43%, reflecting these concerns. Higher yields can sometimes dampen stock performance, as rising borrowing costs impact corporate profits. However, this increase did not hinder Wednesday’s stock rally, indicating strong investor confidence. JJ Kinahan, CEO of IG North America, stated that while “things appear to be strong,” he noted an increase in the number of “bears monitoring” as it could eventually challenge broader economic stability.

Trump Media Stock Soars

Trump’s media company, Trump Media & Technology Group (NASDAQ: DJT), also experienced a surge in its stock value. Shares rose 30% early Wednesday before settling at a 6% gain by the market’s close. Trump’s significant stake in the company means that his financial standing could benefit directly from his political victory, further incentivizing investors to rally behind the company. The company owns Truth Social, a social media platform favored by Trump supporters, which has grown in popularity as Trump’s influence in the political and economic realms continues.

View Trump Media Interactive Stock Chart on Barchart

Global Markets and Currency Movements

Trump’s policies, particularly his stance on tariffs and tax reforms, also influenced global currency markets. The US dollar posted its most substantial gain since 2016, as investors anticipated higher interest rates under a Trump administration. The dollar rose sharply against other major currencies, while the euro and pound sank as global markets responded to the potential impact of Trump’s policies on international trade.

European stocks reacted with mixed results. While some indexes initially saw gains, they closed lower, anticipating that increased tariffs and a stronger dollar might hurt the region’s exporters. Meanwhile, Asian markets showed resilience; Japan’s Nikkei 225 (NKY) rose 2.6%, while the Shanghai Composite Index (CHSC) in mainland China dipped slightly amid concerns about possible renewed trade tensions with the US.

Investor Outlook

For now, the “Trump trade” appears to be driving optimism in both stocks and cryptocurrencies. Markets are embracing Trump’s promises of a pro-business administration, betting that his policies will stimulate growth, lower taxes, and reduce regulatory burdens across various sectors.

However, as Morningstar’s (NASDAQ: MORN) European market strategist Michael Field pointed out:

“With the Republican party on the cusp of a clean sweep of Congress and the presidency, US markets are rallying. This is less an endorsement of every facet of the Republican manifesto, but because markets like visibility, and clear governmental control provides that.”

The next few months will reveal more about Trump’s policies and their impact on the markets. For now, the financial landscape is adapting quickly, with investors seizing the opportunities that his election brings, while remaining cautious about the potential risks of inflation and regulatory shifts.

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Disclaimer: Wealthy VC does not hold a position in any of the stocks, ETFs or cryptocurrencies mentioned in this article.

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