Dow will rise more than 1,200 points as Trump is re-elected

New York
CNN
—

Markets were set to rise sharply Wednesday morning after a shift toward Republicans, including a decisive and significant re-election of former President Donald Trump in Tuesday’s election.

Dow futures rose 1,200 points, or 2.9%. The broader S&P 500 was 2.3% higher and the tech-heavy Nasdaq rose 1.8%.

Trump flipped several swing states from President Joe Biden’s 2020 victory, and Republicans also took control of the Senate. Several key house races are still undecided. A so-called red wave could usher in an era of deregulation and other pro-business laws and policies that investors believe could benefit the stock market.

However, Trump has advocated for policies, including tax cuts and increased government spending, that could significantly increase the US budget deficit. It devalued US Treasuries and so interest rates, which trade in the opposite direction of bond prices, rose sharply.

The 10-year bond yield rose above 4.4%, undercutting the U.S. Federal Reserve’s efforts to cut interest rates to jumpstart the economy. The Fed had been raising interest rates over the past few years to combat a devastating rise in inflation. But it began cutting rates in September and is generally expected to cut again on Thursday at the end of its two-day policy meeting.

Although the Fed funds rate can affect Treasury yields, consumer loans, including mortgage rates, auto loans and credit cards, are more closely tied to Treasury yields. So Trump’s victory, at least for now, looks set to keep those rates somewhat higher.

Other so-called Trump trades, including shares of his social media stock, Trump Media and Technology Group, rose Wednesday morning. TMTG shares, trading under the symbol “DJT”, rose 30%.

The US dollar also rose 1.7% against the euro and the British pound to its highest level since July. The dollar could benefit from Trump’s radical plan to raise tariffs significantly, perhaps creating more demand for American goods at home – although most economists oppose the plan and many suggest it will not change consumer behavior.

However, Trump’s tariff plan could boost inflation and also undercut the Fed’s rate-cutting efforts.

Bitcoin also rose to a new high near $74,000 on Wednesday morning. Trump has warmed to cryptocurrencies in recent months after broadly opposing them in his first term. Cryptos have surged as Trump’s chances of re-election appeared to increase.