S&P 500 Hits All-Time Highs As Trump Wins Election

Stocks hit all-time highs, bond yields jumped and the dollar was set for its best day since 2020, with investors mapping out Donald Trump’s return to the White House and what his policies will mean for markets.

The S&P 500 climbed 2%, heading toward its 48th record this year, on bets the newly elected president will enact pro-growth policies that will boost Corporate America. A gauge of small caps rallied 4.6% amid speculation they will benefit from Trump’s protectionist stance, while wagers on lower taxes and reduced regulation lifted banks. Insurers focused on the Medicare market jumped on expectations the government will pay higher rates to companies that provide private versions of the US health program for seniors. Trump Media & Technology Group Corp. gained 6%.

Wall Street’s “fear gauge” — the VIX — tumbled the most since August to around 16. Trading on stocks spiked, with the S&P 500 volume 110% above the average of the past month. The Dow Jones Transportation Average jumped to a fresh high after a three-year drought of records, finally confirming the strength of its industrial counterpart. The breakout is a bullish sign to followers of an investing framework known as Dow Theory that says synchronized gains in both gauges portend better times ahead for the broad market.

“For now, investor sentiment is pro-growth, pro-deregulation, and pro-markets,” said David Bahnsen, chief investment officer at The Bahnsen Group. “There is also an assumption that M&A activity will pickup and that more tax cuts are coming or the existing ones will be extended. This creates a strong backdrop for stocks.”

Treasury yields climbed across the curve, with the move led by longer-term bonds as traders slashed wagers on the scope of rate cuts by the Federal Reserve. Investors have doubled down on bets for policies such as tax cuts and tariffs that could trigger price pressures. The moves also signal worries that Trump’s proposals will fuel the budget deficit and spur higher bond supply.

The dollar rallied against most major currencies, with the euro down 1.9%. The Mexican peso pared its loss to 0.7%. Bitcoin, viewed by many as a so-called Trump trade after he embraced digital assets during his campaign, hit a record high. Commodities came under pressure, with gold and copper tumbling. Oil wavered.

“The biggest takeaway from last night is that we received certainty that the market craves,” said Ryan Grabinski at Strategas. “This will allow both business and consumer confidence to improve. Attention now should shift to the Fed meeting tomorrow. The 10-year is approaching the 4.5% level, that’s the level risk assets ran into some trouble in the last 24 months.”

The S&P 500 hovered near 5,900. The Nasdaq 100 added 2.1%. The Dow Jones Industrial Average climbed 3.1%.

Treasury 10-year yields advanced 18 basis points to 4.45%. The Bloomberg Dollar Spot Index rose 1.3% The Markit CDX North American High Yield Index, which rises as perceived credit risk declines, briefly reached its highest level since January 2022.

To Thierry Wizman at Macquarie, traders have to be mindful about pushing the “yield story much further.”

“If there’s a surprise coming from Trump in the next few months (at least relative to hyped-up expectations), it will be about fiscal restraint — rather than fiscal irresponsibility. When the market realizes this, long-term UST yields could stabilize or decline.”

With many investors braced for a prolonged period of uncertainty, simply gaining some clarity on the outcome is providing a sigh of relief, according to Keith Lerner at Truist. He says the market currently appears more focused on the positive aspects of Trump’s agenda with less emphasis on the potential of tariffs and wider policy outcomes.

“Markets are pricing in most of the positives today, though the backdrop is complex, and rates, deficit concerns, the potential for fewer Fed rate cuts, and tariffs could eventually provide a counterbalance to today’s upside price shock, he noted. “Still, the weight of the evidence in our work indicates the bull market still has some longevity left, and we are sticking with the primary market uptrend.”

Fed officials are widely expected to lower their benchmark interest rate on Thursday by a quarter percentage point, a move that will come on the heels of a half-point cut in September. They have projected one more quarter-point cut this year, in December, and an additional full point of reductions in 2025, according to the median estimate released in September.

Policymakers, however, may now approach the question of when and how much to cut more cautiously as they assess how Trump’s economic proposals will be turned into actual policies, said Derek Tang, an economist at LH Meyer/Monetary Policy Analytics.

“The Fed is still likely to cut by 25 basis points at Thursday’s meeting and likely to cut again in December,” said Yung-Yu Ma at BMO Wealth Management. “As we move into 2025, we believe it’s possible that we only see two or three cuts for the year depending on the mix of policy and growth that plays out.”

The makeup of Congress will also be key going forward.

Republicans won control of the US Senate amid a slew of victories by allies of Trump, giving the GOP powerful leverage in high-stakes tax and spending battles next year. Meantime, Democrats needs a net gain of just four House seats to wrest the slim majority from Republicans. But with several key races still too close to call — particularly in notoriously slow-counting California — it could be days before it’s clear which party has the majority.

“Assuming the House goes Republican, we expect that a Red Sweep outcome will play out in a similar fashion to the 2016 playbook but to a lesser degree given a more mature economic backdrop and higher equity valuations,” said Jeff Schulze at ClearBridge Investments. “Business animal spirits could be rekindled once again from Trump’s pro-business approach.”

Schulze says that which could lead to a more robust capital expenditures and investment environment. A more favorable corporate tax regime, full extension of the Tax Cuts and Jobs Act, and a lighter regulatory touch should outweigh the potential headwinds from increased tariffs and reduced immigration on corporate profits.

“We expect cyclical leadership to continue in the coming months as the market anticipates stronger economic growth and better earnings delivery from this cohort than is currently priced,” Schulze noted.

“Favorable macro drivers still dominate, and the prospect of a Republican sweep and lower taxes is adding to the market enthusiasm,” said Ma at BMO. “That may get tempered in the coming weeks by more details regarding tariff policy or a continued rise in long-term Treasury yields, but for the past two years we’ve said that the environment is favorable for risk-taking and that remains the case.”

In addition, the potential for extension of personal tax cuts under a Republican sweep are only marginally positive for the equity markets, he noted. Corporate tax cuts are much more significant, and while there have been promises to do more on this front, they come with unclear stipulations, including requirements that companies keep manufacturing operations in the US,” Ma concluded.

“Markets hate uncertainty and now that the election is officially over, stocks are soaring today,” said Ryan Detrick at Carson Group. “Optimism over tax cuts, a still dovish Fed, and a potentially better economy are part of it, but the reality is the economy has been quite solid all year, so this really isn’t anything new. Back to your regularly scheduled bull market is how we see it.”

Chris Senyek at Wolfe Research says he remains bullish on stocks into year-end.

“With Donald Trump winning the 47th Presidency of the United States, we believe that markets will heavily favor financials, US-based industrials (transports), energy, and crypto today and into year-end, he said. “We think more offensive tech outperforms as well with semis outperforming. By style, we’d own value, equal weight, small-cap and year-to-date laggards.”

At Ameriprise, Anthony Saglimbene says animal spirits through year-end could push major averages higher as the overhang of the election is removed and investors look to put excess cash to work in equities

“Finally, US stocks may see tailwinds from not only the election results but a retreat in volatility hedging, corporations moving out of their buyback blackout periods as the earnings season winds down, and strong fourth-quarter seasonality factors (particularly in election years).”

Key events this week:

• China trade, forex reserves, Thursday

• UK BOE rate decision, Thursday

• US Fed rate decision, Thursday

• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 2% as of 11:31 a.m. New York time

• The Nasdaq 100 rose 2.1%

• The Dow Jones Industrial Average rose 3.1%

• The Stoxx Europe 600 fell 0.6%

• The MSCI World Index rose 1.2%

• The Russell 2000 Index rose 4.6%

Currencies

• The Bloomberg Dollar Spot Index rose 1.3%

• The euro fell 1.8% to $1.0729

• The British pound fell 1.2% to $1.2879

• The Japanese yen fell 1.9% to 154.45 per dollar

• The Mexican peso fell 0.7% to 20.2623

Cryptocurrencies

• Bitcoin rose 7.4% to $74,248.1

• Ether rose 9.8% to $2,652.98

Bonds

• The yield on 10-year Treasuries advanced 18 basis points to 4.45%

• Germany’s 10-year yield declined three basis points to 2.40%

• Britain’s 10-year yield advanced four basis points to 4.56%

Commodities

• West Texas Intermediate crude was little changed

• Spot gold fell 2.8% to $2,666.93 an ounce