The Trump trade is soaring as bitcoin, dollar, bond yields surge

Investors are turning to the Trump trade after the former president clinched a US election victory.

Trump passed the 270-vote Electoral College majority after winning Wisconsin in the early hours of Wednesday.

The win has resulted in a continuation of the so-called Trump trade, which has for months hinged on the former president’s election odds. Central to the trade are Trump’s plans for a near-universal tariff and mass deportations, which would push inflation higher.

Here’s a rundown of how markets are moving in response to Trump’s climbing odds:

Treasury yields are sharply higher

The benchmark 10-year Treasury yield climbed as much as 21 basis points to 4.48%, the highest since early July. The two-year yield — the most directly sensitive to Fed monetary-policy changes — gained six basis points to reach 4.25%.

A Trump victory is viewed as an inflationary event, which would fuel higher prices and wage growth.

Investors have been pricing in higher yields for weeks on the view that Trump’s policies would make it hard for the Fed to lower rates much further, especially if inflation flares.

The US dollar is surging

The Bloomberg Dollar Spot Index was up as much as 1.7%, the most in four years, hitting its highest level since November 2023. The greenback climbed against every G10 currency, including gains exeeding 1.8% against both the euro and yen.

The dollar also rose 2.6% against the Mexican peso. The currency cross has been seen as a bellwether of Trump’s election chances, given his expressed desire to “reshore” Mexican manufacturing back to the US.

The expected inflationary nature of Trump’s policies would likely push interest rates higher and could prompt the Fed to tighten monetary policy, reversing its current easing efforts. Those climbing rates would then underpin further dollar gains.

Stock futures are higher

Supporters of Trump’s proposed tax and regulatory policies view them as pro-business moves that would boost corporate profits and deal activity.

S&P 500 futures were up 2.3%, while Dow Jones Industrial Average futures increased 3.3%, and Nasdaq 100 futures rose 1.7%.

European stocks were up too, with the UK’s benchmark FTSE 100 up 0.9% at 1:10 p.m. local time (8:10 a.m. ET). In Germany, the DAX was up 0.5%, while France’s CAC40 rose 0.9%.

“Stocks markets so far like the clarity of the Trump win this morning,” Neil Wilson, chief market analyst at Finalto, said in a morning note.

Especially Tesla

Founder and CEO Elon Musk has been an outspoken Trump supporter. Shares of Tesla spiked 13% in pre-market trading on expectations the electric automaker will be a major beneficiary of Trump’s presidential return.

… and Trump Media

Trump Media and Technology Group shares rallied more than 30% in pre-market trading. The stock has seen a meme-like rally in recent weeks as the former president strengthened his position in betting markets and the polls.

Still, it’s a highly volatile stock, closing more than 10% higher or lower in five of the last six days. Last week it saw a three-day skid of 40% as Harris election odds surged on promising early polling.

Small-cap stocks are spiking

Futures on the small-cap Russell 2000 index rose 6.1% as of 8:10 a.m. in New York. They are viewed as getting an outsize boost from Trump’s protectionist policies, since they generally have more domestic operations.

Bitcoin hit a record high

The cryptocurrency rose as much as 9% set a new high above $75,000 before retreating to around $74,000. A Trump win is seen as bullish for bitcoin and the broader cryptocurrency industry, as Trump has firmly embraced digital assets in recent years.

“With Trump’s win, the conditions may be right for Bitcoin’s price to continue its ascent as investors seek alternatives to the dollar,” Naeem Aslam, chief investment officer at Zaye Capital Markets, said in a morning note.

Volatility is subsiding

The CBOE Volatility Index, which measures the forward 30-day expected volatility in the S&P 500 over a rolling 30-day period, dropped more than 20%. Wall Street’s so-called fear gauge generally trades inversely to the benchmark index, and the decline shows signs of calming nerves.