Mel Rising Dawn Cordeiro
News Editor
In a historic turn of events, former President Donald Trump’s re-election to the White House sparked dramatic movements across global financial markets. In the wake of the election results, U.S. stocks surged to new record highs, the dollar posted its biggest gain in eight years, and Bitcoin soared to an all-time high. However, while investors celebrated on Wall Street, economic experts are eyeing potential challenges ahead under Trump’s second administration.
Following Trump's victory, U.S. stock indexes saw major gains, with banks leading the charge. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all climbed to new record highs. Investors reacted positively to the possibility of continued tax cuts and economic deregulation, which Trump has promised to prioritize. The financial sector particularly saw impressive gains, with many banks benefiting from expectations of higher interest rates.
The dollar too posted impressive gains, rising by about 1.65% against several global currencies, including the British pound, euro, and Japanese yen. The pound fell sharply, down 1.16% to its lowest level since August. In contrast, European markets struggled, with the German DAX and French CAC 40 closing down 1.14% and 0.51%, respectively. Meanwhile, Japan’s Nikkei 225 rose by 2.6% in Asia, while the Hang Seng Index in Hong Kong dropped 2.23%.
Bitcoin also experienced an unprecedented surge, jumping more than $6,600 to hit an all-time high of $75,999.04. Trump’s vocal support for the cryptocurrency during his campaign is believed to have contributed to the rally. Unlike the Biden administration, which has moved to tighten regulation of the crypto sector, Trump has promised to make the U.S. the "Bitcoin superpower of the world."
In addition, Trump suggested that he could fire Gary Gensler, the head of the U.S. Securities and Exchange Commission, a move that would be welcomed by crypto advocates who see Gensler’s policies as too restrictive. Elon Musk, a long-time cryptocurrency supporter, also saw a boost for his company, Tesla, which saw shares rise by over 14% on the news. Musk, who has been a vocal Trump supporter, is also rumored to be in line for a role overseeing a government audit of wasteful spending.
Even though U.S. markets have reacted strongly in favor of Trump’s victory, investors are also anticipating challenges ahead. Many are concerned that Trump’s economic policies—particularly his proposals for tax cuts and significant tariff increases—could lead to inflation and slower interest rate cuts by the Federal Reserve. A higher interest rate environment could benefit dollar-based investments but might slow overall economic growth.
U.S. bond yields soared following the election, signaling that investors expect more government borrowing under the Trump administration, which could push up the cost of debt. However, this could also signal fears that Trump’s economic policies may lead to increased inflation and higher borrowing costs for both the government and businesses.
Economists are also warning of potential economic disruptions globally, particularly in Europe and Asia. Trump’s trade policies, which include plans for dramatic tariff hikes—especially on China—have raised concerns in the U.K. and Eurozone. U.K. Chancellor Rachel Reeves has already expressed the government's intention to make strong representations to the incoming president about the need for free and open trade.
Some experts predict that if Trump follows through on his tariff policies, economic growth in the U.K. could slow significantly, with growth estimates for 2025 now reduced to 0.4%, down from a previous forecast of 1.2%. Moody’s Katrina Ell highlighted concerns in Asia, where Trump’s protectionist stance could lead to increased trade tensions, particularly with China.
Beyond economics, Trump’s foreign policy stance remains a point of uncertainty for global markets. The president-elect’s more isolationist approach, especially concerning the defense of Taiwan—a critical semiconductor producer—has raised concerns in Asia. Taiwan’s role in global tech production makes its stability essential to the technology sector, and any shift in U.S. policy regarding Taiwan’s defense could have far-reaching consequences.
As Trump begins preparations for his second term, financial markets will be keeping a close watch on his economic agenda, with particular attention on the Federal Reserve’s upcoming interest rate decision. Jerome Powell, the head of the Federal Reserve, is expected to provide more clarity on future monetary policy, which could have a significant impact on both U.S. and global markets in the coming months.
As the dust settles from the election, markets are likely to remain volatile, as investors attempt to price in the potential impacts of Trump’s policies. While his supporters are optimistic about the return of tax cuts, deregulation, and a strong dollar, others are wary of the long-term effects of his trade policies and protectionist stance. In the coming weeks, more clarity on Trump’s economic and foreign policies will be needed before investors can fully gauge the impact of his second term on global markets.
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