Donald Trump’s victory in the US presidential election caused a whirlwind of excitement on the stock and financial markets on Wednesday.
Posted at 6:49 p.m.
In the United States in particular, major stock indexes reached all-time highs and the US dollar rose to its highest level in years.
In the opinion of analysts, this reaction of financial markets after a presidential election is partly explained by the end of several months of uncertainty over the outcome of the vote.
However, they also believe that this reaction to Donald Trump’s decisive victory is amplified by investors’ expectations for a rebound in economic growth under a new Republican administration in Washington, with its program of pro-business measures.
“The outcome of the US elections is unlikely to harm the economy. On the contrary, the “Trump cocktail” of deregulation and corporate tax cuts, combined with some interest rate cuts by the Federal Reserve (Fed), could cause economic growth to explode in 2025,” says Hugo Ste -Marie, director of portfolio strategy and quantitative analysis at Scotiabank Markets, in a note to her investor clients.
“Meanwhile, the imposition of customs duties on imports [promise par Donald Trump] constitutes the real uncertainty. Because if these customs tariffs prove too severe, it could interrupt the upward momentum of the stock markets, and perhaps even reverse it. »
New highs on the American stock market
The main American stock indices reached record levels on Wednesday, as investors bet on the favorable consequences of a return of Donald Trump to the White House for the American economy.
The S&P 500 index jumped 2.5% on its best day in nearly two years. The Dow Jones index jumped 3.5% and the NASDAQ market index gained 3%.
Banking sector stocks contributed the most to this bullish surge in the stock market, as investors anticipate that a stronger economy will generate more loans and interest income for banks.
They are also banking on regulatory relief under a future Trump administration that could encourage corporate mergers and acquisitions; transactions from which investment banks could earn significant fee income.
Separately, shares of electric vehicle maker Tesla, led by billionaire Elon Musk, who is an important ally of Donald Trump, jumped 14% on Wednesday.
Analysts say even though economic policies considered by Mr. Trump could harm the electric vehicle industry, including a reduction in government subsidies, Tesla’s influence in this market is such that it could continue to benefit from it to the detriment of its competitors.
Modest increase on the Canadian stock market
On the Toronto Stock Exchange, the S&P/TSX Composite Index closed up a moderate 1%, at 24,637 points.
Although Canadian energy stocks had a strong start to the day, alongside technology and financials, the index was later held back by utilities, telecommunications, base metals and health care. health.
Among other things, shares of Canadian companies in the cannabis sector fell as electoral initiatives aimed at legalizing recreational cannabis in several American states failed.
Rising US dollar
The value of the US dollar on the currency market soared on Wednesday after Republican Donald Trump’s victory in the presidential election.
For example, the “dollar index,” which compares the U.S. dollar to a basket of currencies, has reached a new high since July.
The value of the Canadian dollar has not escaped this renewed popularity of the American dollar. The loonie fell back to around 71 US cents, to its lowest since May 2020, at the start of the pandemic economic crisis.
“Trump’s election suggests that the interest rate gap between the Fed (US Federal Reserve) and the Bank of Canada, which is already large by historical standards, could widen even further, leading to a further decline in the Canadian dollar compared to the US dollar,” says Hugo Ste-Marie, director of portfolio strategy and quantitative analysis at Scotiabank World Markets.
Obligations et bitcoin
In the bond markets, the interest rate on 10-year bonds issued by the US government rebounded to around 4.45% on Wednesday, and the rate on two-year bonds rose to 4.28%.
The value attributed to bitcoin rose sharply on Wednesday after the electoral victory of Donald Trump, who declared himself in favor of the growth of the cryptocurrency market.
Bitcoin surpassed the US$75,000 mark for the first time, up almost 7% on the previous day’s price.
Obviously, bitcoin traders are very excited about the prospect of regulatory relaxation and tax measures promised by Donald Trump to promote the cryptocurrency market.
With Agence France-Presse, La Presse Canadienne, the Associated Press and Refinitiv/Reuters
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