To The Moon

Trump's Election Victory: Implications for Major Asset Classes

Donald Trump wins US presidency, igniting a "Trump Trade" surge in financial markets. $Trump Media & Technology(DJT)$   was the most volatile, skyrocketing over 35% in pre-market trading on Wednesday. $Tesla Motors(TSLA)$   shares climbed more than 15%, while $Bitcoin (BTC.CC)$ briefly surpassed $75,000, reaching a record high.

Among major assets, the U.S. Dollar Index climbed as much as 1.6%, reaching its highest level in a year. U.S. Treasury yields rose, with $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ increasing by 12 basis points to 4.428%, marking a four-month high. S&P 500 futures advanced 1.2%, and Russell 2000 futures gained 2.6%.

Trump's policy proposals include significant fiscal stimulus, domestic tax cuts, tariffs on foreign goods, deregulation, the expulsion of illegal immigrants, a focus on technology in industrial policy, and the promotion of fossil fuels.

1) U.S. Stocks

Donald Trump's proposals to slash corporate taxes and cut regulation are widely viewed as market-friendly, driving economic growth and boosting corporate earnings. His infrastructure initiatives are expected to spur demand for construction materials and services. Meanwhile, Trump's immigration policies could increase demand for detention facilities. These moves stand to benefit stocks in sectors like financials, traditional energy, small caps, cryptocurrencies, technology, prison operations, and infrastructure.

In Wednesday's pre-market trading, financial stocks saw notable gains. $Wells Fargo(WFC)$   jumped over 9%, while $Goldman Sachs(GS)$  ,$Morgan Stanley (MS.US)$, $Citigroup (C.US)$, and $Bank of America (BAC.US)$ rose more than 7%. $JPMorgan Chase & Co (JPM.CA)$ and $KKR & Co (KKR.US)$ increased over 6%. Cryptocurrency-related stocks such as $CleanSpark (CLSK.US)$, $Riot Platforms (RIOT.US)$ , $Coinbase (COIN.US)$, and $MARA Holdings (MARA.US)$ climbed over 10%. 

Besides, Industrial names like $United States Steel (X.US)$ and $Caterpillar (CAT.US)$ rose over 6%. Prison operators $The GEO Group Inc (GEO.US)$ surged over 22%, and $CoreCivic, Inc. (CXW.US)$ climbed over 16%. Infrastructure stocks $United Rentals (URI.US)$ and $CRH PLC (CRH.US)$ increased more than 4%. Energy companies $Chevron (CVX.US)$ gained over 3%, while $Exxon Mobil (XOM.US)$ and $ConocoPhillips (COP.US)$ advanced more than 2%. 

Jeffries' Mohit Kumar believes that under Trump's policies, economic growth prospects look promising, with the Federal Reserve ready to cut rates. He anticipates further gains in U.S. stocks, expecting them to continue outperforming European and global indices.

2) U.S. Dollar

Trump has advocated for dollar depreciation to boost U.S. manufacturing and reduce trade deficits. However, analysts generally view the costs of dollar depreciation as high and unsustainable. Trump's tariffs and immigration policies could trigger trade conflicts and inflation.

The U.S. dollar is set to gain strength amid rising demand for safe-haven assets, growing inflationary pressures, and the imposition of tariffs on economies outside the dollar bloc.

3) U.S. Treasuries

Wall Street broadly expects bond yields to surge under a Trump victory, as Republican policies might include tax cuts and high tariffs, potentially widening the fiscal deficit and reigniting inflation.

Wolfe Research Chief Economist Stephanie Roth predicts yields could approach 4.5% if Trump wins. Nuveen's Head of Macro Credit and Global Investment Strategy Laura Cooper notes that under a Republican sweep, "we’re looking at curve steepeners."

4) Cryptocurrencies

Trump is a strong advocate for cryptocurrency development, which might see continued upward momentum. He previously stated his ambition to make the U.S. the “crypto capital of the planet” and pledged to establish a “strategic bitcoin reserve,” replacing SEC Chair Gary Gensler, viewed as hawkish on cryptocurrencies.

Bernstein analyst Gautam Chhugani stated in a research report on Monday that a Trump victory could propel Bitcoin to a new high of $80,000 to $90,000 by Inauguration Day. Regardless of the election outcome, the target price for Bitcoin in 2025 is $200,000. He noted, "Bitcoin's primary drivers remain U.S. fiscal indiscipline, record debt levels, and monetary expansion."

5) Commodities

Gold is seen as a hedge against geopolitical and economic uncertainties and tends to thrive in low interest rate environments. Analysts generally believe that global trade disputes may intensify during Trump's term, benefiting gold.

Capital.com Financial Markets Analyst Kyle Rodda remarked, "Gold is a part of the Trump trade and in the long term ought to benefit from a Trump victory, mostly due to the impacts of huge deficit spending but also because of potentially more uncertain U.S. foreign policy."

"While a stronger US dollar and higher yields in a Trump win may be headwinds for gold, this will be balanced with potential safe-haven demand in the event of any trade tensions from potential tariffs,” noted Jun Rong Yeap, a market strategist with IG Asia Pte.

Industrial commodities such as oil and copper have historically shown limited reaction to the "Trump trade," with prices largely influenced by supply and demand factors. A significant increase in the dollar could weigh on oil and other commodity prices, rendering them more costly in other currencies.

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