Markets React to Trump’s Historical Win

• “Trump trade” (Tesla, Bitcoin, Stocks) hits jackpot as Trump elected the 47^thS. President
• Elon recognized by Trump as “genius” who needs to be “protected”
• Equities higher in front of today’s almost certain Fed rate cut
• Treasury yields jump as tax cuts, deregulation, tariffs likely to cause higher economic growth and inflation

Trump Presidency for US Markets and Economy

Republican Donald J. Trump won the 2024 US Presidential election, defeating Democrat Kamala Harris in a somewhat close but decisive win.

Republicans also win the Senate majority, while US House of Representatives control is yet to be decided.

Source: AP

With the Republicans controlling the House, a second Trump administration would have greater authority to implement its agenda regarding taxes, energy, trade, and regulation.

This Congressional control is crucial for Trump to renew provisions of the expiring Tax Cuts and Jobs Act.

The newly elected president is expected to suggest additional tax cuts, which may include reductions in corporate tax rates.

Furthermore, Trump’s victory is anticipated to lead to some deregulation efforts, including the potential rollback of certain regulations and a reduction in specific aspects of the Inflation Reduction Act, such as incentives for electric vehicles.

Equity Markets Rejoice

The market’s performance on the day after an election has been a reliable indicator of where it will end up over the following two weeks. In the last seven elections, this correlation has held 100% of the time, and it has been accurate 79% of the time since 1928.[1].

That makes Wednesday’s 2.5% gain for the S&P 500 on Trump’s election win a great signal for the market bulls, historically.

Source: Koyfin

Broader market gains likely reflect expectations for a potential Trump’s corporate tax cuts under what looks to be unified Republican control in Washington. 

Further, the Fed is expected to continue its easing cycle with 25 bps cuts at its meeting today, which should continue to provide support for equity markets.

U.S. equity markets should be supported by solid economic and corporate earnings growth, political clarity, and Federal Reserve rate cuts.

Tesla Stock Surges to 15-Month High

The electric vehicle manufacturer is expected to benefit under a second Trump presidency.

It’s CEO Elon Musk was arguably the most prominent supporter of Republicans this election cycle, backing them with over $130 million in spending and constant support, his social media platform “X”.

“Let me tell you, we have a new star, a star is born: Elon,” Trump said during an address to supporters at his election party, praising his company SpaceX and calling him a “special guy” and “super genius.”

Trump has said he’d appoint Musk to a new position in the American government: “secretary of cost-cutting”, in the “Department of Government Efficiency”, where Musk has said he’d cut a mind-blowing $2 trillion out of the federal budget.

The potential for higher China tariffs could prevent cheaper Chinese EV players from entering the US market in the future.

Wall Street also believes that Trump’s policies could benefit Tesla.

“The biggest positive from a Trump win would be for Tesla and Musk,” Daniel Ives, a Wedbush Securities

CFRA Research lifted their Tesla price target to $375 (from $265), implying over +20% upside from current prices (yellow line).

Source: Koyfin

Crypto Markets Cheer

Crypto Markets also cheered the US newly elected president, as Bitcoin powered to a record of $76,000, crossing $1.5 trillion in valuation.

Trump’s campaign was filled with promises of lighter crypto regulations and lots of support from Congress for crypto-focused investments and initiatives.

Trump has vowed to fire Securities and Exchange Commission boss Gary Gensler who had launched several lawsuits against Coinbase and other crypto-centric companies.

Coinbase, the biggest US-based crypto exchange and the only public crypto trading venue, surged by 31%, on Wednesday, while its CEO, Brian Armstrong, commented, “No matter how you slice it, this election was a huge win for crypto.”

MicroStrategy (MSTR), rose more than 13% on the presidential news, as its Market cap crossed $50 billion valuation.

The company holds 252k bitcoins as of September 30, 2024, making it the largest publicly traded company bitcoin holder worldwide.[2]

Bond Markets are Worried

Investors seem to be moving from the safety of bonds to riskier assets like stocks and crypto.

Neither presidential candidate has indicated any policies toward the reduction of the US budget deficit, which is projected to increase further over the next decade.

This has been driving Yields to jump nearly 75 basis points since mid september, as investors seek more compensation for the risk of holding long-duration bonds.

Source: Koyfin

The sell-off in bonds causes the yields on the long end of the curve (10 Treasuries) to go up, the most since April on the election news.

Investors can long the S&P 500 using our 5x S&P 500, 3x US 500.

Investors can long Tesla using our Tesla 2x Tesla, 3x Tesla.

Investors can long Crypto using our 3x Coinbase, 3x MicroStrategy.

Investors can long Bonds using our  5x 7-10 Year Treasury Bond, 5x 20+ Year Treasury Bond

Alternatively, traders can short the S&P 500 using our -5x S&P 500.

Alternatively, traders can short Tesla using our -1x Tesla, -2x Tesla, -3x Tesla.

Alternatively, traders can short Crypto using our -3x Coinbase, -3x MicroStrategy.

Alternatively, traders can short Bonds using our  -5x 7-10 Year Treasury Bond, -5x 20+ Year Treasury Bond.

1. Bank of America
2. https://www.coingecko.com/en/public-companies-bitcoin