US stock futures rose sharply early Wednesday when results of the presidential election points to a possible victory for Donald Trump and Republican control of the Senate.
Reliably Republican and Democratic states have fallen into the hands of Trump and Kamala Harris. But top fluctuating state Pennsylvania, North Carolina and Georgia were called upon to support Trump, increasing his chances of victory. Prediction market has priced Trump’s odds of winning at almost 100%.
Futures for the Dow Jones Industrial Average rose 840 points, or 2%, the S&P 500 added 1.8% and the Nasdaq added 1.8%.
The so-called Trump trade recovered after retreating on Tuesday and Monday. The greenback rose, with the US Dollar index up 1.5%. The 10-year Treasury yield rose 13 basis points to 4.12% and Bitcoin rose 6% to $74,481 after briefly touching $75,000.
Those assets track Trump’s political prospects as his tariffs, tax cuts and immigration crackdowns are seen as inflationary, limiting the Federal Reserve’s ability to lower interest rates further, while he has also rebranded himself as a champion in the cryptocurrency field.
Meanwhile, shares of Trump Media and Technology rose 10% in after-hours trading. close lower during the regular trading session amid volatile trading conditions. Tesla rose 3% as CEO Elon Musk was a top Trump supporter, while solar stocks fell as renewable energy stocks could see a comeback climate initiatives.
Overseas markets are cautiously watching the final hours of the US election as the next president could have a major impact on the global economy, especially trade. Trump has vowed to increase taxes on all fronts, especially taxes on China are about to skyrocket. And on Monday, he threatened to impose a 25% tariff on imports from Mexico unless the country closes its border with the US – and increase the tariff to up to 100% if it does not comply.
In China, Shanghai SSE The composite index fell 0.1%. In Japan, the Nikkei 225 index increased 2.6% as the Yen depreciated against the USD, making the country’s exports cheaper. Earlier in Europe, the Stoxx 50 rose 0.4% while the Stoxx Europe 600 rose less than 0.1%.
Other races are also important, as the party that controls Congress will also determine how much time the next president has to enact policies. Republicans have flipped the Senate, while the outcome in the House remains unclear. Separately, the Fed concludes its policy meeting on Thursday, with interest rates expected to fall 25 basis points.
The Trump Economy vs. the Harris Economy
Under another Trump administration, investors expect less regulation from the federal government. That will boost banking stocks, cryptocurrency and crypto stocks like Coinbaseas well as companies in the oil and gas sector.
He also threatened to roll back President Joe Biden’s signature policies, including those promoting renewable energy and electric vehicles. Trump’s promise to limit immigration and launch a campaign of mass deportations has also lifted the stock prices of prison operators Geo Group and CoreCivic.
The Harris administration is largely seen as providing more continuity with the Biden administration, maintaining policies promoting green energy and infrastructure. She has also unveiled plans to encourage more housing supply, potentially benefiting homebuilding stocks.
Their different views on taxes will also affect corporate earnings, personal earnings and stocks. Trump has promised to extend tax cuts from his first term and bring corporate interest rates even lower. He has also introduced a series of elimination measures, including taxes on tips, overtime pay and Social Security payments, as well as exemptions for military, veterans and other applicants. first deputy. He even flirts eliminate income tax whole.
Harris supports Trump’s extension of tax cuts for Americans with incomes under $400,000, but not for the richest. She also pledged to raise corporate rates and force the rich to pay taxes on unrealized capital gains, while expanding child tax credits and tax breaks for small businesses.
The next president faces huge US debt
Whoever the next president is, he or she will likely have to contend with America’s growing debt and budget deficit.
But that could come sooner under the Trump administration. Budget watchdogs have warned of a exploding federal deficit. While it would expand under Trump or Harrisfemale Penn Wharton’s budget model and The Federal Budget Committee is responsible said that Trump’s policies would create a much deeper hole. Trump ally Elon Musk said he could cut federal spending by $2 trillion, but Skeptics note that is unlikely without cutting benefits and the military or destroy the economy.
Neither candidate has made deficit reduction a priority in their campaigns, but financial markets could push the issue. “Beware of bonds,” or investors protesting large deficits by selling off bonds to push yields higher, is weighed in on the electionaccording to Wall Street veteran Ed Yardeni, who coined the term in the 1980s.
As the Treasury auctions off larger amounts of debt to fund the federal government’s ocean of red ink, bond investors could balk, posting higher interest rates and increasing borrowing costs in the financial sector. key segments of the economy, such as mortgage interest rates.
“Bond vigilantes may also vote against Washington, arguing that no matter which party wins the White House and Congress, fiscal policies will do so,” Yardeni and colleague Eric Wallerstein wrote last month. adding to the federal government’s already strained budget deficit and increasing inflation.” . “The next administration will face a net interest bill of more than $1 trillion on the ballooning federal debt.”
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