The financial markets were the first entities to react to Donald Trump’s victory Tuesday in the presidential election and the reactions were varied and extreme.
Before the New York Stock Exchange opened Wednesday morning the Dow Jones futures surged by more than 1,200 points. When the opening bell rang, the Dow was up more than 1,300 points and the S&P 500 was up more than 100 points.
Bank stocks were particularly strong, with several big banks surging more than 10% at the open. Analysts say investors are optimistic about what a second Trump presidency will mean for the economy.
Bitcoin at a record high
But stocks weren’t the only asset class in strong rally mode. The price of Bitcoin surged to a record high of more than $75,000. Trump is seen as friendly toward cryptocurrency, but Harris also embraced Bitcoin so it rallied ahead of election day.
But Trump has been more supportive of Bitcoin, a shift from his position during his first term. At one point during the campaign, Trump said he wanted the U.S. to be the “crypto capital of the planet.”
While Bitcoin surged, the price of gold sold off hard, interrupting what had been a year-long rally. But analysts said the main reason for gold’s sell-off is a sudden surge in the value of the U.S. dollar.
As the dollar becomes more valuable, it takes fewer dollars to purchase an ounce of the precious metal. Other commodities priced in dollars also lost value.
Bond yields are up
The bond market is also reacting to the election results. Bond prices are down while the yield on the 10-year Treasury bond rose to 4.47%. Again, investors are anticipating stronger economic growth.
Rising bond yields may be good for investors but they won’t make buying a home more affordable. Mortgage rates tend to rise along with Treasury yields.
History shows that financial markets tend to breathe a sigh of relief after an election is over, no matter who wins, but Wednesday's reaction was stronger than most.