Stocks, Tesla, Banks, and Bitcoin Soar Following Trump's Victory in the White House

NEW YORK (AP) — The U.S. stock market, Tesla, banks, and bitcoin all surged on Wednesday as investors speculated on the implications of Donald Trump’s return to the White House for the economy and beyond. Conversely, sectors like renewable energy faced potential downturns alongside concerns about rising inflation.

The S&P 500 experienced a remarkable rally of 2.5%, marking its best performance in nearly two years. The Dow Jones Industrial Average soared by 1,508 points, or 3.6%, while the Nasdaq composite rose by 3%. All three indexes surpassed recent record highs.

Historically, the U.S. stock market has tended to rise regardless of which party occupies the White House; however, average gains have been larger under Democratic leadership since 1945. Republican control may lead to significant shifts among various industries as investors recalibrate their expectations based on anticipated higher tariffs, lower tax rates, and reduced regulations that Trump advocates.

“The markets are scrambling to figure out what happens next, but for the time being, the market is pricing in a higher growth and higher inflation outlook,” said Peter Esho of Esho Capital.

The extent of changes during Trump's second term will likely depend on whether his fellow Republicans gain control of Congress—a situation that remains uncertain and could result in some reversal of Wednesday's market movements.

Amidst this backdrop, clear winners and losers emerged following Trump’s decisive victory:

Bank stocks: UP

Bank stocks led the upward movement in the market due to optimism that a stronger economy would translate into more loans being issued and repaid with interest. Additionally, there were hopes for lighter regulation from a Republican administration. JPMorgan Chase surged by 11.5%, with financial stocks showing the most substantial gains among the S&P 500's eleven sectors. Capital One Financial climbed by 15%, while Discover Financial jumped by an impressive 20.2% amid speculation that their impending merger will receive expedited federal approval under Trump.

Crypto: UP

Trump has expressed ambitions to establish the U.S. as “the crypto capital of the planet” and create a “strategic reserve” of bitcoin. Bitcoin reached an all-time high exceeding $76,480 according to CoinDesk before settling just below $76,100 later on. Companies within the cryptocurrency sector also saw significant gains; notably, trading platform Coinbase experienced a remarkable leap of 31.1%.

Tesla: UP

Elon Musk has become an ally of Trump and has openly supported his campaign efforts. While Trump's policies may negatively impact government subsidies for electric vehicles overall, analysts suggest Tesla could benefit due to its established presence in the industry. Consequently, Tesla shares increased by 14.8%, whereas competitor Rivian Automotive saw an decline of 8.3%.

A company associated with Trump’s Truth Social platform rose by 5.9% after experiencing an earlier spike of nearly 35%. Its trading activity is often influenced more by Trump's popularity than its actual profit prospects; this increase occurred despite reports detailing a loss of $19.2 million during the latest quarter along with declining sales compared to last year.

Private-Prison Operators, UP

A Trump-led administration may advocate for stricter border enforcement, potentially increasing business for companies collaborating with U.S. Immigration and Customs Enforcement (ICE). For instance, GEO Group, which manages ICE processing centers, experienced a significant surge of 42.1% in its stock value.

Stocks of Smaller Companies, UP

Trump’s America-First policies could benefit companies primarily serving domestic customers rather than large multinationals that may suffer from heightened tariffs and protectionist measures. The Russell 2000 index, representing smaller stocks more focused on the domestic market compared to the S&P 500's larger companies, rose by 5.8%. This increase was more than double that of the S&P 500.

Treasury Bond Prices, DOWN

Investors anticipate that Trump’s policies could foster stronger economic growth, which typically leads to a decline in Treasury prices and an increase in yields. Furthermore, potential tax cuts could exacerbate the U.S. government's deficit, resulting in higher borrowing needs and escalating yields. Recently, the yield on the 10-year Treasury jumped to 4.43%, up from 4.29% late Tuesday—a significant shift for the bond market—especially considering it was below 4% as recently as August.

Inflation Worries, UP

There are growing concerns among investors that Trump’s policies could contribute to future inflation increases, particularly through tariffs that might raise costs for U.S. households.

“Trump keeps openly telling people that he will increase tariffs not just on China but with every trade partner,” said Andrzej Skiba, head of BlueBay U.S. Fixed Income at RBC Global Asset Management. “We’re talking about 10% tariffs across all global partners. This is significant because it could add about 1% to inflation. If next year’s inflation numbers rise by that amount, we should say goodbye to rate cuts.”

A reduction in immigration might also lead to a labor shortage for employers, compelling them to offer higher wages and further elevating inflationary pressures.

Expectations for Interest Rate Cuts, MUDDLED

This year's strong performance on Wall Street has largely been fueled by expectations of upcoming interest rate cuts by the Federal Reserve as inflation appears to be stabilizing around its target of 2%. While lower interest rates can stimulate economic growth, they may also contribute additional pressure on inflation.

The Fed is set to announce its latest decision regarding interest rates soon; current data from CME Group still suggests an anticipated cut. However, traders are beginning to adjust their forecasts regarding how many cuts might occur through mid-next year.

Foreign Currencies Down Against the Dollar

Trump has pledged substantial increases in tariffs on imports from China and Mexico among other nations, heightening fears of trade wars and potential disruptions within the global economy. A measure reflecting the value of the U.S. dollar against several major currencies rose by 1.6%, indicating a decline in those currencies' values.

The euro fell by 1.5%, while the South Korean won decreased by 1.2%. The Mexican peso has been experiencing declines against the dollar since summer due in part to concerns surrounding Trump’s possible re-election; it dropped early in trading but later reduced some losses.

Renewable Energy Stocks, DOWN

With Trump’s preference for fossil fuels, particularly in promoting oil and natural gas production, the renewable energy sector faced significant setbacks following his victory. Notably, First Solar experienced a sharp decline of 10.1%, while Enphase Energy saw its stock drop by 16.8%.

In the S&P 500, the only stock to suffer a more considerable loss was Super Micro Computer, which forecasted quarterly sales below expectations, leading to an 18.1% decrease in its stock value.

Despite these declines in certain sectors, the overall market thrived. The S&P 500 climbed by 146.28 points to reach 5,929.04. The Dow Jones Industrial Average surged by 1,508.05 points to hit 43,729.93, and the Nasdaq composite rose by 544.29 points to settle at 18,983.47.