As the Republican presidential candidate Trump surpasses the election threshold, the “Trump Trade” gains momentum, with U.S. stock futures rising across the board before market open. Trump Media & Technology Group surged 47.76% in pre-market trading, and Tesla, benefiting from CEO Elon Musk’s support for Trump, surged over 12% before the open.
(Preliminary Context:
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(Background Supplement:
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The official vote count for the U.S. presidential election began, with Republican candidate Trump leading throughout. According to real-time vote data from Fox News, Trump has secured 277 electoral votes, surpassing the 270 needed to win, defeating Kamala Harris to claim the White House. Trump also delivered a victory speech earlier.
Trump Trade Surges
As Trump crosses the election threshold, investors have reacted very positively. CNBC data shows the Dow Jones Industrial Average futures surged 1,112 points or 2.62% to 43,493 points; S&P futures surged 125.75 points or 2.16% to 5,938 points; Nasdaq futures surged 363 points or 1.78% to 20,704.75 points.
The “Trump Trade” targets showed strong gains, with Trump Media & Technology Group surging 47.76% in pre-market trading to $50.15, and Tesla benefiting from CEO Elon Musk’s support for Trump, surging 12.87% in pre-market trading to $283.8.
The dollar index strengthened, reaching as high as 105.326, recording its largest gain against major currencies since 2020. U.S. bond prices plummeted, and U.S. bond yields surged, with the 10-year Treasury yield reaching as high as 4.471% today, currently at 4.412%.
Market Optimistic about Trump’s Economic Growth Stimulus
Bloomberg reports that despite the vote count not being fully completed, market volatility sends a clear signal that investors expect Trump’s second term to be similar to his first, with a range of policies including tax cuts and deregulation, stimulating economic growth, corporate profits, and inflation.
Ed Al-Hussainy, a rate strategist at Columbia Threadneedle Investment, stated:
While investors have generally reacted positively, market volatility also sends a stern warning. The surge in U.S. bond yields highlights concerns that Trump’s policies will only further expand the swelling budget deficit and reignite an inflationary spiral. In Wall Street parlance, this is the “bond vigilantes” pressuring Washington leaders to control spending.
Currently, the long positions in the S&P 500, Nasdaq 100, and Russell 2000 indices have increased to around $400 billion, nearly double from two years ago, while short positions have fallen below $100 billion for the first time since 2015.
George Saravelos, Global Head of FX Research at Deutsche Bank, stated that the more the recent agenda emphasizes tax cuts and deregulation, the more favorable it is for risk assets. However, Ed Al-Hussainy believes that there will be some profit-taking in the Trump Trade, while on the other side, there will be bottom-fishing trades. To what extent this can balance the market remains too early to tell.
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