Stock markets rose broadly on Wednesday amid certainty about Donald Trump’s victory in the US presidential election, although experts warned there was no guarantee that the “Trump shock” would last.
US stocks rose on Wednesday morning after news that Trump had won a second term.
The Dow Jones Industrial Average rose just over 1,500 points when markets closed. The S&P 500 rose 2.5 percent on the day, and Canada’s benchmark S&P/TSX index rose 228 points to 24,608.41.
Bond yields also rose on Wednesday, with the 10-year US Treasury yield rising more than 15 basis points, and longer-term Canadian government bonds also rising.
The stock market charges were led by US banks such as Goldman Sachs and JPMorgan Chase. Alan Small, senior investment advisor in his financial group at iA Private Wealth, tells Global News that the increase is tied to hopes that the victorious Republican nominee will enact a deregulation agenda when he takes office.
Cryptocurrencies have also enjoyed a boom — Trump promised to make the United States the “crypto capital of the planet” during the election campaign — sending Bitcoin soaring to a new high on Wednesday.
Select stocks delivered mixed performances based on their associations with Trump.
Shares of Trump Media and Technology Group, majority owned by Trump, rose about six percent before the end of the day. Investors ignored the company’s latest quarterly results, which showed that Truth Social’s parent company had revenues of just $1 million.
Shares of Elon Musk’s Ally Tesla rose 14.75 percent in trading on Wednesday, while Small pointed to Trump’s previous statements criticizing Meta CEO Mark Zuckerberg as a contributor to that stock’s decline.
But Small says stock markets are likely to react positively regardless of whether it is Trump or Vice President Kamala Harris, the Democratic nominee, who comes out on top Wednesday morning. He says it was the fact that there was a decisive winner at all, after weeks of warnings that it could be days before the election results were finalized, that gave markets a broad boost.
“Markets, as we know, like certainty. I think that’s another big factor behind markets rising forward.
Will Trump’s “bump” continue?
Josh Shylock, portfolio manager and chief investment officer at Verecan Capital Management, tells Global News that the stock market’s jump so far is “very reactionary” and may be short-lived.
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Shylock recalls that the day after Trump won the election for the first time in 2016, markets initially reacted with a broad sell-off before rebounding the next day to finish somewhat higher.
“I wouldn’t be surprised to see something similar happen here where there was an initial knee-jerk reaction, and then when people wake up a little bit and come off the highs — or lows, or whatever — of Trump being elected, things will kind of moderate over the next few days.” Coming.
Small agrees that there is no telling how long the current “Trump shock” in markets will last, depending on whether investors choose to take profits in the coming days.
“I’m not sure today’s honeymoon will last several days,” he says.
For now, markets are only reacting to perceptions of the incoming administration’s “pro-growth agenda,” Small explains, and that may change in the coming days as new comments or information such as the US Federal Reserve’s interest rate decision on Thursday come to light.
Trump’s economic platform this campaign focused largely on America First policies such as sweeping tariffs that many economists warned could lead to higher inflation globally.
Economists at TD Bank said in a note on Wednesday that, with a new presidency confirmed, they are curbing their expectations on how quickly the Fed will cut interest rates, arguing that the U.S. central bank will need to keep borrowing costs high in the face of the inflationary pressures of Trump’s policy. Proposals. TD now sees the Fed cutting by a quarter point on Thursday while keeping interest rates half a point higher by the end of 2025 than previously forecast.
If Trump were to implement all of his policy proposals from the campaign, TD Bank expects that the impact from tariffs and tougher border policies would outweigh any growth benefit from potential tax cuts.
“This would leave the US economy on a weaker growth path, with higher structural deficits, inflation and interest rates,” TD Bank economists wrote.
Small argues that with the House electoral results awaited, the best outcome for markets may be a divided Congress acting as a check on the Trump administration.
How should investors react to Trump’s win?
But Shylock also points out that just because a politician says they will do something on the campaign trail does not mean the policy will unfold in the same way, if at all.
He says that until the Trump administration legislates or develops policy plans for companies, it is impossible to know how these plans will impact specific market sectors or companies.
For this reason, Shylock recommends that the average investor take little or no direct action in response to market volatility in the wake of the US election.
“I don’t want to be too glib about this, but it’s very difficult to predict and building a well-diversified portfolio is going to be a much better approach than trying to guess exactly what’s going to happen,” he says.
Small says that in the few hours after Trump’s apparent election, he was receiving phone calls from clients asking how they could also get exposure to assets like bitcoin that were rising.
But like Shylock, Small says he had not made any changes to his own portfolio as of Wednesday.
When markets face a historic event like the US election, he says it’s best to stick to the 24-hour or even three-day rule to wait and see where things go.
“For me, there’s a lot going on. I think you want to take a step back right now. Give yourself 24 hours to see where the dust settles and then you can figure out your next steps.”
– With files from The Canadian Press, Reuters
