We’ll hand it to betting markets—they accurately predicted a landslide victory for former President Donald Trump.
After hours of Steve Kornacki’s voice whispering into our ears so late into the night that we became unsure whether he was real or a specter created by our minds as we descended into an election-night haze, it became increasingly clear American voters were electing Trump.
Here in the light of day with the election results confirmed, the Trump trade is in full swing. These are the investments roaring higher on Donald Trump’s second election victory.
- Stocks across the board soared in anticipation of lower corporate taxes, looser regulation, and more M&A activity across sectors.
- Perhaps the two most obvious beneficiaries of a Trump victory were Trump Media & Technology Group, which rose 5.94%, and Elon Musk’s Tesla, up 14.75%.
- Trump’s policies should particularly benefit big banks like JPMorgan Chase and Wells Fargo, which gained 11.54% and 13.11%, respectively, and big oil companies like Exxon Mobil, which climbed 1.71%.
- Bitcoin hit a new all-time high, and Ethereum also soared. Coinbase, the largest US crypto exchange, jumped 31.11%, and crypto investment firm Galaxy Digital popped 24.86%.
- Fixed-income yields skyrocketed as investors sold off bonds and priced in an inflationary environment from policies such as aggressive tariffs and expanding the national deficit, which would lead to fewer Fed rate cuts.
- The US dollar also soared, enjoying its best day since 2020 on expectations that tariffs would result in fewer US imports.
- But clean energy stocks dropped hard: The Invesco Solar ETF plummeted 10.77%, and stocks such as Enphase Energy, First Solar, and SolarEdge all fell in anticipation that Trump would end renewable energy subsidies put in place by the Biden administration.
Is this market optimism warranted?
Famed billionaire investor Leon Cooperman warned on CNBC’s Squawk Box that investors might be pricing in too much optimism, especially considering the pressure of bond yields.
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“I’m not short on anything, but my inclination would be to sell stocks on strength,” he said.
The big picture: While right now the market is celebrating, it’s important to keep in mind that not every industry will enjoy a lasting boost just from less regulation.
“Like any regime shift, there will be winners and losers, so investors should be discriminating in their portfolio allocations,” explained Chief Economist for LPL Financial Jeffrey Roach.
Then again, try telling that to the crypto traders celebrating like it’s Christmas morning. “Make no mistake about it: Crypto won the election last night,” wrote Bitwise Chief Investment Officer Matt Hougan in a note today.
PS: If you’re curious about how betting markets predicted the election, check out Brew Markets’ latest YouTube video on how these platforms work.—LB