Global stock markets surged on Wednesday following Donald Trump’s victory in the U.S. presidential election, with investors reacting to the prospect of domestic policy changes that could benefit American companies.
Small-cap U.S. stocks saw significant gains, driven by expectations that a Trump presidency might bring tax cuts and enhanced support for domestic firms. S&P and Nasdaq futures increased by over 2%, and small-cap-focused Russell 2000 futures leapt by 6%.
Bitcoin also reached a record high, and the dollar index surged by 1.4%, marking its biggest one-day jump since March 2023. However, in bond markets, long-dated U.S. Treasuries experienced a sell-off, as investors weighed the implications of Trump's policies, such as potential tariffs that could increase both inflation and the federal deficit.
This trend reflects investor speculation that the Federal Reserve may be compelled to adopt a more cautious stance on future rate cuts, potentially raising concerns about the U.S.’s fiscal health.
European markets reacted positively, with the STOXX Europe 600 index climbing 0.9%, while emerging markets felt pressure, particularly in Mexico, where the peso dropped to its weakest point in over two years.
The peso’s decline underscores concerns over potential trade disruptions under a Trump administration, especially in countries heavily reliant on U.S. economic policies.
Seema Shah, Principal Asset Management’s chief global strategist, observed that markets are responding in alignment with Trump’s policy promises, particularly favouring small-cap stocks under the assumption that his presidency will bolster U.S.-focused businesses.
Source:
Reuters
