With Donald Trump all set to return to the White House, the US dollars and stock market are seen as winners, according to Edison Research. As trends projected Trump’s victory in the crucial and high-stake US presidential elections, US dollar surged and Bitcoin also hit a record high. The election result is going to have a major impact on the global economy.
Earlier in the day, the US dollar soared by about 1.4% against a host of different currencies, including the pound, euro and the Japanese yen. The value of Bitcoin has also jumped by $6,000 (£4,645) to a record high of $75,371.69, surpassing the previous high of $73,797.98 seen in March this year. Trump has previously pledged to make the US the “bitcoin and cryptocurrency capital of the world”. His approach stands in stark contrast with that of the Biden administration, which led a sweeping crackdown on crypto firms in recent years.
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Tesla shares also soared after the victory of Republican candidate and former President Donald Trump in the 2024 US elections whom CEO Elon Musk had personally endorsed. The after-hours consolidated last trade value of Tesla stock on the Nasdaq hit $258.69, which is a 6.53% or $15.85 rise. The after-hours high was $265.49 as at 7:36 pm ET, according to Hindustan Times.
Trump wins: What’s at stake for global economy?
Currencies: Trump’s comeback is seen strengthening the US dollar. Investors are hopeful that Trump’s policies would lead to higher inflation and growth than would have been the case under Democrat Kamala Harris. That will mean the Federal Reserve would need to keep rates high to prevent the economy from overheating, which in turn would be bullish for the dollar, reported Reuters.
Moreover, Trump also plans to impose tariffs on trade, which means forcing European allies to pay more for defence, boosting the dollar’s allure. Citi analysts expect the dollar to rally 3% after a Trump win, the report said. Analysts have expected a sharp fall in the euro and China’s yuan to slide further.
With a Trump administration expected to take a softer line on cryptocurrency regulation, bitcoin is another potential winner. The world’s largest cryptocurrency rose to an all-time high on Wednesday.
Stocks: Donald Trump promised of less regulation and lower taxes for big corporations if he is elected as the president. He also called for more oil production and tough immigration policy point to stronger growth and inflation, which is seen as positive sign for equities. With Trump’s win, sectors such as banks, technology, defense and fossil fuels are likely to benefit.
His plan to cut the corporate tax rate to 15% from 21% would raise S&P 500 earnings by about 4%, Goldman Sachs estimates. It, however, remains clear, that how much tax Trump plans to cut to make it through Congress. Moreover, protectionist policies and tough stance on China would raise costs, reduce profitability and hurt multinational companies.
Outside US, a strong dollar, rising US rates and trade tensions will mean defensive sectors might perform better. Multinational companies with exposure to U.S. markets will take a hit.
According to Reuters report, sectors exposed to tariff changes, such as semiconductors, autos and clean energy, will likely be volatile. Barclays has warned of possible “high single-digit” percentage drops in European earnings should trade conflicts reignite. Europe’s defense sector is likely to have a mixed outcome, after Trump said he will end the Ukraine war but has also said European allies need to spend more on defense.
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Bonds: A bond is essentially an IOU that can be traded in the financial markets and governments often sell bonds to investors when they want to borrow money. Investors have expressed apprehensions about the scale of US government debt and fiscal deficits adding to it. Investors are worried that it will push up borrowing costs. Trump’s spending plans could add $7.5 trillion to deficits over 10 years, according to one estimate, far greater than what Harris had proposed. Inflationary pressures from Trump’s policies would leave the Fed with less room to cut rates, which will keep Treasury yields elevated.
A Trump win is also likely to suppress growth in Europe and Asia, as tariffs and other policies put pressure on those economies. More pressures on the euro, yen, Swiss franc and other currencies, and higher inflation will reduce the room central banks there have to cut rates as needed. Analysts expect global yields to rise, the report said.
Commodities: Another key area which is at stake is commodities. Trump will aim to maximize U.S. oil and gas drilling by expanding federal leasing and rolling back environmental regulation where possible. That robust supply could help keep U.S. West Texas Intermediate crude futures, which dropped around 4% so far this year, relatively low. He has also vowed to ramp up enforcement of oil sanctions on Iran, something that could deeply affect world crude supply. He has also said he will fill up the Strategic Petroleum Reserve to levels never seen before, which could add support to prices as the government enters the markets.
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Soybeans are also in the crosshairs. U.S. merchants had been racing to ship a record-large harvest ahead of the election amid fears of renewed trade tensions with China, the world’s biggest soy importer. China, which failed to fully comply with a 2020 agreement with the Trump administration to buy more U.S. agricultural goods, has purchased fewer U.S. soybeans this marketing year and almost no corn. Soybean prices are down 25% compared to a year ago, Reuters reported.
Emerging markets: In addition to tariffs on China, Trump has said he would slap a tariff as high as 200% on Mexican vehicle imports. Mexico’s peso could weaken beyond 21 to the dollar, levels not seen in more than two years, analysts say.
Another potential headwind for emerging markets: Trump’s vice presidential candidate JD Vance has proposed a 10% tax on remittances, important for many Latin American economies. Emerging economies with domestic growth and reform stories such as India or South Africa could benefit and become a haven in otherwise volatile global settings. Copper and lithium producer Chile could be largely spared because of the less-replaceable nature of its exports.
A Trump win would allow him to follow through on his campaign promises to roll back green regulations curbing oil and gas drilling and coal mining, which could boost shares in those sectors. He has also vowed to fire Gary Gensler as chair of the U.S. Securities and Exchange Commission.
(With Reuters input)