Stocks Hit Record Highs as Trump Makes Presidential Comeback

NEW YORK — In a dramatic turn of events, U.S. stock markets soared to new heights on Wednesday, setting record highs following Donald Trump’s victory in the 2024 presidential election. This marked a significant return to power for Trump, who had been voted out of office four years earlier.

The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all closed at unprecedented levels. Investors are anticipating benefits from Trump’s promises of tax cuts, deregulation, and his proactive stance on issues ranging from the stock market to the U.S. dollar. However, the introduction of new tariffs might pose challenges, potentially leading to a higher deficit and increased inflation.

The win for the Republican sparked what’s been termed “Trump trades,” which drove U.S. Treasury yields up significantly, with the benchmark 10-year note yield reaching a four-month peak at 4.479%. Bitcoin also surged, reaching a new record of over $75,000, while the dollar saw its largest one-day percentage increase since September 2022.

Before the results, polls showed a very close race, raising concerns about a potentially prolonged decision process.

“Investors were actively adjusting their portfolios to mitigate risks based on the anticipated tight race,” explained Mark Luschini, the chief investment strategist at Janney Montgomery Scott in Philadelphia.

“The situation quickly shifted, leading to a robust risk-on environment today, where practically everything that can grow in a cyclical or growth-oriented context is skyrocketing,” he added.

According to preliminary figures, the S&P 500 climbed by 145.04 points or 2.51%, closing at 5,927.80. The Nasdaq Composite rose by 539.48 points or 2.93%, finishing at 18,978.65. Meanwhile, the Dow Jones Industrial Average surged by 1,504.51 points or 3.56%, ending at 43,726.39.

The Dow and S&P 500 experienced their largest one-day percentage gains since November 2022.

The financial sector led the gains among the 11 major S&P 500 sectors, with banks benefiting significantly from the anticipated deregulation under Trump’s administration. The S&P 500 banks index saw an increase of about 10%, marking its largest daily rise in two years.

The Russell 2000 index, which includes small-cap stocks, reached a three-year high, buoyed by expectations of reduced regulations and taxes, and minimal impact from import tariffs. However, rising Treasury yields could negatively impact smaller companies, which are generally more dependent on borrowing and sensitive to interest rate hikes.

“If this rise in interest rates continues past the current levels of around 4.4% to 4.5%, and we approach the highs of 5% seen last October, it could pressure not only the small caps but the entire market,” Luschini noted.

The CBOE Volatility Index, often referred to as Wall Street’s “Fear Gauge,” dropped to a six-week low of 15.44.

Interest rate-sensitive sectors like real estate and utilities were among the few to decline as investors evaluated the potential for Trump’s policies to drive inflation and influence the Federal Reserve’s interest rate decisions. This is particularly relevant as the Fed is expected to reduce the benchmark interest rate by 25 basis points at its upcoming meeting, with decreasing expectations for further rate cuts in December and the following year, as per the CME’s FedWatch Tool.

Stocks likely to flourish under Trump’s second term saw significant increases, including Trump Media & Technology Group and Tesla, whose CEO Elon Musk has shown support for Trump. Significant gains were also observed in cryptocurrency, energy, and prison operator stocks, while renewable energy stocks declined.

Attention is also on whether the Republican Party will retain control over the House of Representatives after securing the U.S. Senate, which would smooth the path for Trump’s agenda.

(This story has been updated with new information.)