Wall Street hits record high as Trump wins US presidency

Wall Street marched to record highs today and major stock markets around the world surged, while bitcoin also hit an all-time-high and the dollar was set for its biggest one-day jump in four years after Donald Trump was elected US president.

Trump's decisive victory pummelled long-dated Treasuries as yields sank in anticipation that Trump would hike tariffs as he promised during his campaign, increasing the US deficit and inflation, and causing the Federal Reserve to cut rates by less than it otherwise would have.

Trump, 78, recaptured the White House in Tuesday's election following a campaign that deepened the polarization in the country.

"In the near term, we see US equities supported by solid economic and corporate earnings growth, political clarity and Federal Reserve rate cuts," BlackRock Investment Institute said. "Longer term, much depends on how much of Trump's agenda is enacted."

The VIX, a measure of volatility also perceived as "Wall Street's fear gauge," dived 19% as investors scooped up risky assets across the board.

The S&P 500 Index jumped 1.7%, the Dow Jones Industrial Average surged 3%, and the Nasdaq Composite leapt 1.95%. All three indices hit record highs on Wednesday. The MSCI index for world stocks rose 0.8%.

Small cap US stocks in particular were boosted by expectations that a Trump presidency would offer tax cuts and support domestic companies.

The dollar index rallied 1.6% and was set for its best day since September 2022.

Outside the United States, investors were decidedly less euphoric, as concerns that higher tariffs imposed by Trump would hurt global trade and economic growth weighed on markets.

European shares ended lower today, following a broad rally earlier in the session, hurt by a drop in utilities shares on fears that US President-elect Donald Trump could halt fresh approvals for offshore wind projects.

The CAC in Paris ended 37 points lower (0.51%) at 7,369, while the DAX was down 216 points (1.13%) to 19,039 and London's FTSE index was down five points (0.07%) to 8,166.

Dublin's ISEQ index was down 155 points (1.56%) to 9,783. Shares in Dalata Hotel Group were up 3.75% to €4.56, while shares in Irish Continental Group were up 2.27% to €5.40. Meanwhile, shares in Glanbia were down 7.18% to €14.35, while shares in Bank of Ireland were down 4.2% to €8.57.

"The market is definitely moving in line with the Trump playbook; stocks and small caps, in particular, are higher on the idea that Trump will be good for US companies," said Seema Shah, chief global strategist for Principal Asset Management in London.

"Across emerging markets, you can see China and Europe are struggling with the idea that they could face higher tariffs, and US bond yields higher with expectations for a higher fiscal deficit and inflation."

Bonds disconnect

US borrowing costs surged particularly for longer-dated bonds, suggesting concern from investors about the US deficit path.

The ten-year Treasury yield rallied 16.2 basis points to 4.4531%, its largest gain in a single day in nearly seven months.

The 30-year Treasury yield rose 18 bps to 4.6298% its biggest one-day increase since March 2020's pandemic-induced volatility.

While markets were still confident the Federal Reserve would cut interest rates by 25 basis points on Thursday, they slightly reduced bets on further easing in December.

"The big challenge for markets is that if you do see tariffs come through you need to balance the short-term nature of inflation risks with the medium-term aspect of lower growth," said Justin Onuekwusi, chief investment officer at investment firm St. James's Place.

"The market appears to be thinking about inflation right now."

In contrast, European government bonds rallied, and German two-year bond yields fell 11 basis points to 2.19%, while money markets priced in lower European Central Bank rates.

"For European businesses, Trump's return to the White House would mean considerable trade policy and geopolitical uncertainty, with negative implications for growth on the continent," said Berenberg chief economist Holger Schmieding.