With the announcement of Trump’s victory, stock and bitcoin prices exploded

Excitement – this is how the state of the American stock markets can be described in one word after the news that Donald Trump declared electoral victory. Results from most polling stations indicate that the former, and apparently future president of the USA won 276 electoral votes, including key states Pennsylvania, North Carolina, and Georgia. The explosive growth of stock indices on Wednesday suggested movements in futures contracts based on investors’ expectations of lower taxes and a wave of deregulation. Around noon our time, among the three leading indices, the Dow Jones stood out, jumping 1250 points, or 2.9 percent.

Stock market statistics remember that the last time the Dow Jones surged more than a thousand points was in November 2022. The futures contract on the S&P 500 jumped 2.4 percent while the futures contracts on the tech-heavy Nasdaq strengthened ‘only’ 1.8 percent. However, the particularly significant jump was seen in the Russell 2000, an index composed of smaller companies. Given Trump’s promises of regulatory relief, a reduction in the corporate tax rate to 15 percent, and favorable borrowing conditions, this index surged by as much as six percent. The effect of lower taxes will also be felt by large companies. At Goldman Sachs, they estimate that a 15 percent corporate tax rate will increase the earnings of S&P 500 companies by four percent.

Looking individually, it is worth highlighting the double-digit increase in Tesla’s stock price. The shares of the American electric vehicle manufacturer had a 13 percent higher price before the market opened on Wednesday. Such a jump is not unexpected given that the company is led by Elon Musk, who publicly supported Trump, appearing on stage during his campaign rallies. Major winners of Trump’s victory are also bank stocks, such as Bank of America, JP Morgan, and Wells Fargo. These banks strengthened by more than six percent. Trump’s announcements of mass deportations of illegal immigrants also reflected in a significant increase in the stock prices of companies managing prisons. Thus, the price of GEO Group soared by 31 percent, while CoreCivic saw a more modest increase of 25 percent.

What to expect in the future?

However, the biggest direct benefits from the post-election stock market fireworks were realized by Trump himself. The stock price of Trump Media & Technology Group, which manages the social network Truth Social, jumped by 50 percent. Expectations of looser regulation also propelled the price of bitcoin, which reached a record price of $75,000.

If history is a guide, let us recall that the S&P 500 index strengthened by 70 percent during Trump’s first term, during which he lowered the corporate tax rate from 35 to 21 percent. This index’s growth was primarily driven by technology stocks, although Trump’s foreign trade policies, especially towards China, brought considerable volatility. However, the macroeconomic environment today looks significantly different than in 2016. The US GDP grew by 2.8 percent in the third quarter, compared to less than two percent in 2016.

While restrictive monetary policy has somewhat curbed inflation, which soared to its highest level in four decades in 2022, some financiers on Wall Street believe that higher tariffs and tax cuts will reignite inflation. Trump announced that he would increase tariffs on imported goods by 10 percent and on goods imported from China by as much as 60 percent. At Deutsche Bank, they calculated that the US GDP would increase by an additional half a percentage point if tariffs are not implemented.