The "Trump trade" has blown up
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The "Trump trade" has blown up
"Trump trade" surges, pushing the S&P, Nasdaq, and Dow to record highs. Bank stocks rise over 10%, Bitcoin gains 9% approaching $76,000, and Coinbase closes up 31%.
Navigating Web3 tides with focused insightsBy Fang Jiayao, Du Yu, Zhang Yaqi, Xu Chao, Li Xiaoyin, Wall Street Insights
According to CCTV News, Harris called Trump to congratulate him on winning the U.S. presidential election. In this election, Trump swept key swing states, Republicans regained control of the Senate, and House races remain tight, with Republicans expected to hold a narrow lead.
"Trump trades" surged, pushing the S&P 500, Nasdaq, and Dow Jones Industrial Average all to record highs. Bank stocks soared over 10%, Bitcoin rose 9% toward $76,000, and Coinbase closed up 31%.
Dollar index jumped over 1.6% to above 105, offshore RMB fell past 7.2, euro and yen briefly dropped nearly 2% each, gold plunged over 3%, and commodities broadly declined as expectations for Fed rate cuts collapsed and U.S. Treasuries were sold off across the board.
"Trump Trade" Surges
Following Trump's victory, not only did U.S. equity markets rally, but sector rotation also intensified. Investors flocked to bank and traditional energy stocks, while renewable energy alternatives—particularly solar stocks—were heavily dumped.
1) All Three Major U.S. Indices Rise
The S&P 500 gained 146.28 points, or 2.53%, closing at 5,929.04—the largest post-election day gain in history.
The Dow Jones Industrial Average, closely tied to the economic cycle, rose 1,508.05 points, or 3.57%, to close at 43,729.93. The tech-heavy Nasdaq added 544.29 points, or 2.95%, finishing at 18,983.47.
The VIX volatility index dropped 20.11% to 16.37.
2) Most U.S. Sector ETFs Closed Higher
Regional banking ETF rose more than 13%, banking ETF nearly 12%, financials ETF over 6%, airline ETF over 5%, while energy, consumer discretionary, and internet stock ETFs each gained at least 3%.
3) "Magnificent Seven" Tech Stocks Mostly Up
Tesla rose 14.75%, Google A gained 3.99%, Nvidia climbed 4.07% to a new high, surpassing Apple as the world’s most valuable company by market cap. Microsoft advanced 2.12%, Amazon jumped 3.8% to a record high. Apple dipped 0.33%, Meta edged down 0.07%.
4) Energy Stocks Broadly Rally
Investors anticipate pro-fossil fuel policies under Trump. U.S. oilfield services firm Baker Hughes surged 10.78%, Schlumberger rose nearly 8%, EQT Resources gained 7.56%, KMI added 6.64%, Chevron climbed 2.81%, ExxonMobil rose 1.71%.
5) Solar Stocks Collapse Across the Board
Sunrun plunged 29.63%, Array dropped 21.94%, solar inverter supplier Enphase Energy fell 16.82%, First Solar declined 10.13%.
6) Blockchain-Related Stocks Rally Broadly
On Wednesday during Asian trading hours, Bitcoin broke $75,000 for the first time in history, briefly exceeding $76,000 in late U.S. trading, setting another all-time high with about 10% intraday gain.
At Wednesday’s U.S. market close, Coinbase—the largest U.S. crypto exchange—rose 31.1%, Bitcoin holder MicroStrategy gained 13.2%, Bitcoin mining hardware giant Canaan Creative rose 13%, mining firms Riot Platforms, MARA, Bitfarms, and Stronghold Digital Mining rose 26.2%, 19%, 17.7%, and 17.3% respectively.
7) Philadelphia Stock Exchange Banking Index Soars Over 10%
Trump's win fueled investor hopes of regulatory easing. Wells Fargo rose 13.11%, Morgan Stanley gained 11.61%, Goldman Sachs climbed 13.1%, Citigroup added 8.42%, JPMorgan Chase rose 11.54%, Bank of America gained 8.43%.
Fed Rate Cut Bets Plummet, Treasuries Sold Off
Trump's victory has raised investor concerns about rising fiscal deficits, tax cuts, and tariff-driven inflation, leading traders to scale back bets on future Fed rate cuts. U.S. Treasury yields spiked across the curve.
ECB Vice President Guindos warned that if Trump implements his tariff plans, global growth and inflation could face devastating shocks. ECB Governing Council member and Bank of France Governor Villeroy said Trump's win increases risks to the global economy.
The market now expects only 57 basis points of rate cuts in 2025, with total cuts from now through end-2025 priced below 100 bps.
JPMorgan expects the Fed to cut rates just once per quarter starting March 2025.
Nomura economists forecast the Fed may cut only once in 2025 and raised their terminal rate estimate by 50 bps to 3.625%.
Bank of America Merrill Lynch noted that if Trump takes office and pursues fiscal expansion, the Fed might raise its estimate of neutral interest rates. Moreover, if the new president significantly raises tariffs, the Fed could pause rate cuts due to inflation and growth concerns.
The yield on the 30-year U.S. Treasury bond briefly rose 23 basis points—the largest single-day increase since 2020. The 10-year Treasury yield spiked 20 bps, the biggest jump since April 10.
European Auto and Renewable Energy Stocks Fall
Concerns over Trump's proposed tariffs hit European automakers: BMW fell 6.58%, Mercedes-Benz Group dropped 6.44%, Volkswagen declined 4.27%.
Fears that the Trump administration might halt approvals for new projects caused European renewable energy stocks to fall over 10%. Vestas Wind Systems plunged 12.82%—down more than 23% over two days—while Orsted tumbled 12.79%.
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