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Analysis
November 7, 2024
Although full results have not yet been declared for all states, the overall result of the 2024 US presidential election is no longer in doubt. Donald Trump has won the election and will be the 47th US president. Trump is on track to win a significant majority both in the national popular vote and the electoral college, winning key swing states including Georgia, North Carolina, and Pennsylvania.
Early results showed close competition between the two candidates, but through the night of November 5th Trump pulled ahead nationally, racking up important wins in the ‘Blue Wall’ of midwestern swing states.
The market reaction in Asian equities, US mini-futures and the US dollar has been strongly positive, with bullish financial markets and a risk on environment. Yields on US treasuries have increased, indicating falling prices in US debt markets. Bitcoin traded at record highs as the results went live overnight.
Some details of the election may take days or weeks to be confirmed, including the results of the simultaneous congressional elections, but the overall winner is clear. November 5th has been a good night for the Republican Party, who are now on track to win both the popular vote and electoral college for the first time since 2004.
Donald Trump won re-election, and will be the second president in history to serve two non-consecutive terms, following in the footsteps of Grover Cleveland’s 1893 comeback. Trump’s policy agenda will focus on bringing back manufacturing jobs to the US, reducing immigration, and making improvements to security and economic growth. This is very similar to the agenda he was elected on in 2016, and it is unclear how successful his attempts will be this time around. With the senate, presidency and (most likely) congress now controlled by Republicans, from a legislative perspective the new president’s position will be strong, and his party will be able to pass new legislation with ease.
Trump will begin his second term in January 2025. For now, it is too early to say how his policies will impact US markets in the long term. The key markets to watch out for include energy stocks, US manufacturers, and defence, all of which are sensitive to the likely Republican policy agenda. Trump’s promises to scrap climate commitments and invest in US energy production could see gains for US energy stocks, but it will take time for these results to become apparent. For now, any market moves will be driven more by sentiment than policy, and this will continue until Trump is in office and the Republicans start to pass legislation.
The final result came in quite close to opinion polling, with Republican Donald Trump slightly outperforming expectations across all demographics and regions. His margin of victory in key swing states – some of which are still counting votes, although the overall result is now clear – was small, normally 2-3%. This is within the margin of error of the main polls. Kamala Harris underperformed current president Joe Biden across the entire country, while Trump made improvements to his scores in large cities, where Democrats saw their (still substantial) majority reduced.
FX markets reacted promptly, with EUR/USD falling from 1.09 to 1.07 in sharp moves as the dollar strengthened after exit poll announcements. Crypto assets including Bitcoin also exhibited strong performance, with Bitcoin reaching an all-time high of over $75,000 as the result became apparent. It is not clear how long US dollar and Bitcoin strength will continue, but for now they are both seeing a clear boost from the 2024 presidential election result.
In simultaneous house and senate elections, the Republican Party took control of the Senate, the US upper house, winning two seats from the Democrats. Results in the congressional elections, that decide which party controls the lower house of US lawmakers, are typically released more slowly. So far, Republicans have gained two seats from Democrats, and are defending a narrow national lead from the 2022 midterms.
The Trump trade is in good health, with initial market reaction conforming to the risk on, long equities strategy described in our articles on potential post-election market moves. It is still too early to say exactly how equity markets will react, and traders should remember that sharp market moves may be followed by a corresponding correction. Even so, it is clear financial markets have reacted positively to the emphatic Trump win, perhaps reassured that with likely control of the Senate, Congress, and the Presidency, the Republicans will be able to enact pro-business, pro-growth policies.
The US stock market reaction will become clear later in the week. But futures markets indicate broad strength in US equities, with Dow Jones and S&P500 futures contracts both experiencing strong gains in a volatile pre-market session.
The USD is one of the cornerstones of the Trump trade, and its strength in the coming months will be directly linked to the success of key Trump policies. The balance of trade and perceived strength of the US economy are both key drivers of dollar rates. On election night, EUR/USD and GBP/USD both saw sharp losses as results came out, with Dollar strength driving the Pound and Euro lower. USD/MXN reaction was more muted, with the dollar strengthening against the Peso, but remaining within the recent trading range. Should Trump pass his promised tariffs, USD/MXN may see new highs.
US government debt is a classic safe haven asset and tends to perform well during market turmoil. Unsurprisingly, these assets sold off as traders rotated into equities, with price decreases driving bond yields higher. Traders may continue to rotate out of bonds as the Trump trade solidifies, but look carefully here for any signs of correction if traders start to feel over-extended.
We now know who will be the next US president, and Trump’s victory is decisive. What that means for markets is harder to say – so far, the reaction has been a clear strengthening of the Trump trade, with a global rotation into risk on assets and the US dollar. Traders active in crypto markets, US equities, and the USD are favouring long positions as they speculate on reforms to trade policy and economic growth, but at this stage, the market is responding to sentiment rather than real changes in conditions. The Trump trade will only survive in the long term if Trump is able to enact his agenda successfully, and given he will not begin his term until January 2025 there is plenty of time for jitters or even reversals of this sentiment-driven, risk on trading environment. ADSS traders should keep watching the key policy themes – energy, trade, defence – and see how the Republican legislative agenda develops in the months and years to come.
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