Financial markets are reacting with both trepidation and anticipation to Donald Trump’s victory in the 2024 US presidential election. The so-called ‘Red Sweep,’ which also sees Republicans take control of Congress, has investors bracing for substantial shifts in the US economic and political agenda.
This turn of events, predicted early on by betting platforms like ElectionBettingOdds.com and Polymarket.com, is already causing sharp movements across asset classes, with the euro weakening significantly and Bitcoin surging to a record high.
Trump hails ‘new golden age’ for America
Just before the European markets opened, Trump addressed his supporters in an exultant speech, celebrating the historic scope of his victory. “Look what happened. This is crazy,” Trump declared. “This is a political victory our country has never seen before. We are on the brink of a new golden age for America.”
With Republican control in both the White House and Congress, his administration is expected to advance aggressive tax cuts and sweeping deregulation, particularly targeting the financial and energy sectors.
On Wall Street, a cautiously optimistic sentiment had already taken hold ahead of election night. The Dow Jones posted a 1 percent gain, marking its largest rise since early October, while the S&P 500 and Nasdaq technology index rose by 1.2 percent and 1.4 percent, respectively.
Other assets including gold and Bitcoin also climbed, with Bitcoin—a popular hedge against political instability—soaring over 7 percent to a record high of $75,000. Oil prices declined. Meanwhile, the VIX index, which measures market volatility, fell by 7 percent after reaching earlier highs.
‘Polls lose relevance’
The 2024 election outcome has raised questions over the credibility of traditional polling methods, according to investor Roderick van Zuylen, chief investment officer at Night Watch Investments in Florida. “Nobody will be looking at the polls anymore, all of which predicted a tight race,” Van Zuylen remarked.
He noted that more fluid betting markets like Polymarket may offer greater predictive value, as they tend to capture real-time investor sentiment more accurately. Although these platforms have limitations, they offer valuable insights into the prevailing market risks and the sentiments shaping investment behaviour.
Weaker euro, stronger dollar
As Trump’s victory reverberated through the currency markets, the euro slipped 2 percent to its lowest point in four months. The dollar, regarded as a safe haven in uncertain times, strengthened as investors anticipated potential tax cuts and deregulation under Trump’s renewed leadership.
However, UBS Wealth Management cautioned about the potential for dollar weakening over the medium term: “We expect the US dollar to remain under pressure,” UBS analysts commented, advising investors to take advantage of any dollar strength to diversify into other G10 currencies.
In New York, the atmosphere on the trading floor was tense, said Peter Tuchman, the New York Stock Exchange’s longest-serving broker. Speaking with Investment Officer, Tuchman remarked that many on the floor identified as “radical Republicans,” heightening the sense of urgency in the wake of Trump’s win. “This is definitely not business as usual,” he stated, pointing to the fundamental democratic stakes at play. Tuchman predicts heightened market volatility in the coming days, reflecting the profound implications of Trump’s return to office.
Economic agenda: Shift in direction expected
The economic implications of a Trump second term could be substantial. UBS Chief Investment Officer Mark Haefele indicated in an earlier investor note that Trump’s focus on tax cuts and deregulation would likely provide a boost to US equities. “The US equity market remains attractive due to a combination of favourable growth, lower interest rates, and structural support from AI innovations,” Haefele noted. Nonetheless, the prospect of higher tariffs on Chinese imports raises concerns for trade-dependent sectors, especially in technology and manufacturing.
Meanwhile, Pimco, the world’s largest bond manager, emphasised that the federal budget deficit is expected to widen further under Trump’s economic policies. “Both Trump and Harris would have faced expiring tax cuts from the Trump Tax Cuts and Jobs Act,” explained Libby Cantrill, head of US public policy at Pimco. Pressured to maintain Americans’ purchasing power, Cantrill expects that Trump will largely extend the tax cuts, despite their impact on the national deficit.
Gold holds safe-haven status
With Trump’s return to office sparking fresh uncertainties, gold remains an appealing choice for investors seeking to hedge against economic and political risk. Despite the dollar rally and rising interest rates in the US, the gold price has held steady. UBS forecasts additional upside for gold in the medium term, given the broader macroeconomic risks and lingering geopolitical uncertainties.
Voting security in New York ‘practically untouchable’
Meanwhile, in New York, security measures at polling stations were reportedly stringent, making tampering nearly impossible. According to a senior official at the New York Board of Elections, an intricate system of checks and balances ensures the integrity of voting machines. Journalists were granted access only after multiple identity checks and formal clearance from the State Department, underscoring the careful measures taken to protect the electoral process.
Further reading on Investment Officer Luxembourg:
- How a narrow loss for Trump could rock the markets
- PGIM taps SOFR futures to navigate election uncertainty
- ‘Comrade Kamala‘s’ economic plans get lukewarm reception
