(Bloomberg) — Stocks hit all-time highs, US yields jumped and the dollar saw its best day since 2022, with investors mapping out Donald Trump’s return to presidency and the potential for Republicans to win both houses of Congress.
The S&P 500 climbed 2.5% on bets the newly elected president will enact pro-growth policies that will boost Corporate America. The benchmark had its best post-Election Day in history, according to data compiled by Birinyi Associates Inc. and Bloomberg. A gauge of small caps rallied 5.8% 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 new government will pay higher rates to companies that provide private versions of the US health program for seniors.
Wall Street’s “fear gauge” — the VIX — tumbled the most since August. Almost 19 billion shares changed hands on US exchanges, 63% above the daily average in the past three months. 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.
US 10-year yields advanced 17 basis points to 4.44%. A dollar gauge added 1.3%, with the yen leading losses in major currencies and the euro down 1.8%. The Mexican peso was almost flat after sinking as much as 3.5%. 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 edged lower.
