Trump victory ignites market surge as stocks, dollar, and yields soar

Donald Trump’s victory in the US presidential election sent ripples through global financial markets, triggering what investors are calling the "Trump Trade." US stocks rallied as S&P 500 futures surged 2.3%, while the dollar recorded its largest gain against major currencies since 2020. Treasury yields also jumped sharply, with the benchmark 10-year yield climbing nearly 20 basis points.

Securing key swing states such as Pennsylvania and Wisconsin, Trump won the presidency with a clear margin, giving the GOP control of the Senate after flipping seats in Ohio and West Virginia. Declaring an "unprecedented mandate" from American voters, Trump has solidified his influence, with market participants betting on policies resembling his first term.

The impact of his reelection quickly reverberated through financial assets, lifting stocks, strengthening the dollar, and driving up Treasury yields. Trump's outperformance in key regions and exit polls reflecting ongoing economic frustration among voters indicate strong public support for his economic agenda.

Investors are signaling their expectation that a second Trump administration will pursue the same market-friendly policies that defined his initial tenure, including tax reductions, deregulation, and tariffs. These moves are anticipated to drive economic growth, boost corporate profits, and potentially reignite inflation.

The notable rise in Treasury yields highlights concerns about ballooning budget deficits and the potential for a renewed inflation cycle, just as the Federal Reserve was managing to stabilize prices after the pandemic. The 30-year Treasury yield rose as much as 23 basis points to 4.67%, marking its largest single-day increase since 2020.

In contrast, European bonds rallied as traders began pricing in the likelihood of faster interest-rate cuts across the eurozone, responding to anticipated global trade frictions that could weigh on the region’s already fragile economy. Investors, including Vanguard, who recently positioned for German bonds to outperform, stand to benefit from these dynamics.