Stocks set records and dollar soars after Trump election win

Stocks surged to record highs, the dollar strengthened around the world, and government bond yields soared Wednesday, after a conclusive win by President-elect Donald Trump.

In part, the reaction is typical following a presidential election, with a spate of activity as the outcome of the vote puts an end to months of uncertainty. But analysts and investors noted that the reaction looked stronger than just relief, with traders preparing for more government spending, lighter regulation, bigger deficits and accelerating growth under a Trump administration.

“What we are seeing is a visceral reaction to a surprising outcome given very tight polling,” said Kristina Hooper, chief global market strategist at Invesco. “Markets are reacting positively to a decisive victory.”

U.S. stock markets shot higher at the open of trading Wednesday. The S&P 500 rose more than 2.5%, its biggest one-day gain in roughly two years, while the tech-heavy Nasdaq Composite index moved almost 3% higher. The Dow lurched 3.6% higher. The Russell 2000, which tracks smaller companies, jumped almost 6%, its biggest one-day rise in roughly two years as well.

All four indexes notched record highs at the end of the trading day.

Bitcoin rose sharply, also hitting a record. Trump has promised to end the Biden administration’s regulatory push against cryptocurrency and establish the United States as the “crypto capital of the planet.”

The U.S. dollar rose against the currencies of major trading partners — like the Japanese yen as well as the euro, the Mexican peso and the Chinese yuan — which were expected to be heavily affected by Trump’s proposal to substantially raise tariffs. The euro recorded its steepest daily fall against the dollar in more than four years. Major stock indexes around the world slumped.

The market moves highlight the challenge now facing officials at the Federal Reserve, who are widely expected to cut interest rates when they meet Thursday. Trump’s policies are set to juice the economy, just as the Fed appears to have slowed it down enough to tame inflation, worrying some investors.

“Any way you slice and dice it, we think inflation risks are now higher,” said Calvin Tse, head of Americas macro strategy at BNP Paribas.

Whether the stock market rally will endure is “dependent on what the Fed has to say tomorrow,” said Steve Sosnick, chief strategist at Interactive Brokers. “If bonds really freak out, I think it’s hard for the stock market to go too far. If bonds calm down, then the rally can continue.”

This article originally appeared in The New York Times.

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