Election Frenzy Rocks Markets
As the polls close in over two-thirds of states, markets are experiencing a frenzy of activity. The S&P 500 futures are up 1.1%, US 10-year yields have surged 18 basis points to a four-month high of 4.46%, and Bitcoin has spiked 7.4% to a record high. These moves are closely tied to a potential Republican victory, with early returns bolstering trades linked to Donald Trump’s election prospects.
Dollar Strengthens Amid Haven Demand
The Bloomberg Dollar Spot Index has risen 1.5% amid haven demand and as traders return to wagers seen as benefiting from low-tax and high-tariff policies under a potential Trump administration. The Mexican peso has slumped 2.8%, while the Japanese yen and the euro have slid at least 1.6%. The offshore yuan has declined 1%.
Small Caps and Cryptocurrencies Soar
Contracts on the Russell 2000 Index have added 2.4%, with smaller companies with typically domestic operations seen as potential gainers in a Republican win. Cryptocurrencies, which are seen as benefiting from relaxed regulation and Trump’s public support, have also surged.
Wall Street Weighs In
Analysts are cautioning against overreacting to the early results, citing the uncertainty of the outcome. “It’s still very early and I expect we could see some wide swings in both directions,” said Keith Lerner at Truist. Others are highlighting the potential for outsized moves regardless of the election’s outcome, with Goldman Sachs Group Inc.’s trading desk predicting a Republican sweep could push the S&P 500 up by 3%, while a decline of the same size is possible should the Democrats win both the presidency and Congress.
What’s Next?
As the night wears on, markets will continue to react to the unfolding results. With the potential for wild swings, investors are advised to stay focused on the fundamentals driving markets. As James Demmert at Main Street Research notes, “Investors should look past the election and focus on the fundamentals of what drives markets. The economy and earnings continue to be better than expected, most stocks are reasonably priced, and the Fed is in an accommodative mode.”
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