Trump, Red Sweep Enthusiasm Send Stocks to Record Highs: Nov. 6, 2024

    Date:

    Election results are sending stocks to the moon as investors celebrate GOP control of the White House and Senate. Additionally, Republicans are expected to walk away with a slim majority in the House, with some races still too close to call. Indeed, a red sweep has likely arrived in Washington, with market participants enthusiastic that a lighter regulatory regime, lower tax rates, a business-friendly environment and “Made in America” policies will drive sales and profitability. Equities are also getting a boost from the presidential election outcome being determined promptly, becausesome market participants believed that naming a winner could be a long process. But while equity investors are optimistic, bond traders are cautious, as rate watchers analyze the growth, inflationary and deficit impacts of incoming courses of action.

    Trump’s Path to Victory

    Former president Donald Trump’s path to victory among crucial battlegrounds started with North Carolina, the first swing state race to be called. He then captured the pivotal swing territories of Georgia and Pennsylvania, one of the “blue wall” states that also include Michigan and Wisconsin. The victory substantially narrowed Harris’ path to the 270 electoral votes needed to win the race. Trump then secured Wisconsin, with the state’s 10 electoral votes pushing him to a tally of 276. In winning Georgia, Pennsylvania and Wisconsin, Trump flipped political turf that was won by President Biden in the 2020 race for the White House. As of early Wednesday, Trump’s electoral votes totaled 277 compared to the 224 secured by Harris with Michigan, Arizona and Nevada still undecided.

    Red Sweep Almost Certain

    Republicans captured a 52-seat majority in the Senate despite votes in six races still being counted. The party was able to dislodge Democratic incumbents in Ohio and Montana. The battle for House control, however, remains undecided, but Republicans have a much wider path to holding onto their majority, with IBKR Forecast Trader contracts pointing to a 90% likelihood that the GOP will succeed. As of Wednesday morning, Republicans had won 199 seats and Democrats held only 181, while the results of 55 races were being finalized.

    Election Results Spark Stock Gains

    Stocks are soaring as investors breathe a sigh of relief following election day. All major stateside benchmarks are up sharply with the Russell 2000, Dow Jones Industrial, Nasdaq 100 and S&P 500 indices up 4.6%, 3.1%, 1.9% and 1.8%. Sectoral breadth is positive with 7 out of 11 segments and led by financials, energy and industrials, which are higher by 4.9%, 3.8% and 2.9%. Real estate, utilities and consumer staples are lower by 3.1%, 1.8% and 1.4%, however. Treasurys are taking losses ahead of a $25 billion auction of 30-year bonds this afternoon, with the 2- and 10-year maturities changing hands at 4.28% and 4.45%, 10 and 18 basis points (bps) heavier on the session. Loftier yields are supporting the dollar, with its gauge up 159 bps as the greenback appreciates relative to most of its major counterparts, including the euro, pound sterling, franc, yen, yuan and Aussie and Canadian tenders. Commodities are mostly lower, with copper, silver and gold losing 4%, 3.9% and 2.5%, but crude oil and lumber are higher by 0.8% and 0.5%. WTI crude is trading at $72.47 per barrel despite stateside inventories increasing, as traders bump up economic growth expectations.

    GOP to Power Year-End Rally

    Strong seasonality trends and a GOP sweep are likely to add fuel to the fire for a year-end equity rally. November and December tend to be two of the most bullish months for stocks, and incoming policies from Washington are likely to boost earnings expectations for areas of the market that haven’t participated as much. Small caps, value, industrials, financials, energy, and defense contractors are poised to gain a boost from the new administration. Finally, however, there are risks on the horizon that could derail bullish momentum even though the odds are low at this juncture. Stretched valuations, elevated borrowing costs and tighter financial conditions could pose headwinds to this market if the 10-year approaches 5%. 

    To learn more about ForecastEx, view our Traders’ Academy video here

    Disclosure: Interactive Brokers

    Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

    This material is from IBKR Macroeconomics and is being posted with its permission. The views expressed in this material are solely those of the author and/or IBKR Macroeconomics and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

    Disclosure: Forecast Contracts

    Forecast Contracts are only available to eligible clients of Interactive Brokers LLC, Interactive Brokers Hong Kong Limited, and Interactive Brokers Singapore Pte. Ltd.

    Disclosure: ForecastEx

    Interactive Brokers LLC is a CFTC-registered Futures Commission Merchant and a clearing member and affiliate of ForecastEx LLC (“ForecastEx”). ForecastEx is a CFTC-registered Designated Contract Market and Derivatives Clearing Organization. Interactive Brokers LLC provides access to ForecastEx forecast contracts for eligible customers. Interactive Brokers LLC does not make recommendations with respect to any products available on its platform, including those offered by ForecastEx.

    Disclosure: ForecastEx Market Sentiment

    Displayed outcome information is based on current market sentiment from ForecastEx LLC, an affiliate of IB LLC. Current market sentiment for contracts may be viewed at ForecastEx at https://forecasttrader.interactivebrokers.com/en/home.php. Note: Real-time market sentiment updates are only active during exchange open trading hours. Updates to current market sentiment for overnight activity will be reflected at the open on the next trading day. This information is not intended by IBKR as an opinion or likelihood of a potential outcome.

    Go Source

    Chart

    SignUp For Breaking Alerts

    New Graphic

    We respect your email privacy

    Share post:

    Popular

    More like this
    Related

    How to Start Investing with IBKR

    Starting an investment process can seem daunting. In this...

    Rethinking Asset Growth in Asset Pricing Models

    Your Privacy When you visit any website it may use...

    China’s Turning Point: Inside the Stimulus Plan

    This podcast episode features Andrew Wilkinson and Dr. Xiaolin...

    Chart Advisor: Approaching Nvidia’s Earnings Report

    From SIA Charts 1/ Nvidia Corp. (NVDA) 2/ Matrix 3/ Candlestick Chart Investopedia is...