Trump’s victory brought a huge explosion

Yesterday was a bad day for investors who bet on the victory of the Republican candidate through the so-called “Trump-trade”. This trading strategy involved taking positions in stocks and other investment vehicles that are expected to benefit from the actions expected from Donald Trump, even in the long term.

Although there were those who believed that a Trump victory would cause a correction in their exchange rates due to the “buy it on the rumor – sell it on the news” effect, so far no trace of this could be seen in yesterday’s trading. Analysts generally considered such an election outcome more favorable from the point of view of the stock markets, since the returning president promised to reduce the tax and administrative burdens on companies, while if Kamala Harris won, there would be a good chance that the tax rates on companies would have increased.

The S&P 500 index showed a 2.5 percent increase the day after the election, setting a new historical closing peak at 5,929 points. By the way, it continued its march and is well on its way to reaching the target price above 6100 points, which could be guessed after breaking out of the previous rising triangle formation.

One of the most spectacular rallies was produced by Tesla shares. Not that Trump’s policy, which is generally favorable to renewable energy and more environmentally friendly technologies, is actually the opposite, according to analysts. This was much more aimed at the person of Elon Musk, who holds the leadership position of Tesla and has significant ownership in it, who massively exposed himself to Trump during the campaign and is expected to play a role in the next cabinet. Shares of the electric car manufacturer rose 14.75 percent on Wednesday, increasing Musk’s fortune by $15 billion in one day. the Financial Times pointed out.

They were among the winners of the day US bank stocks too. This is due to a double effect.

• On the one hand, the market expects a significant relaxation of the regulation of American banks from a Trump presidency, which could have a beneficial effect on their profits.
• On the other hand, there is a general belief that a Trump presidency will increase inflationary pressures in the economy.

This results in the fact that the Fed, which plays the role of the American central bank – which is meeting today, by the way – will not be able to reduce interest rates to the extent expected earlier, and higher interest rates generally result in bigger bank profits.

Citigroup rose by 8.6 percent, Bank of America by 8.4 percent, JPMorgan by 11.5 percent, and Wells Fargo by 13.1 percent. The KBW Bank index, which tracks the entire sector, rose by 13.03 percent, reaching a level last seen at the beginning of 2022.

The two mortgage bond companies currently majority-owned by the state produced an amazing jump, the one in need of a state lifeline in 2008 Fannie Mae is Freddie Mac. Both shares, which are already in the penny category, gained nearly 40 percent, as Trump repeatedly hinted in his previous term that he would privatize companies that had become profitable in the meantime.

They could also reap a lot from the private prisons shareholders of operating companies, price jumps of 30-40 percent within one day were not unprecedented in this sector either. Oil industry papers also benefited from the sentiment, but here the euphoria was relatively more restrained, so the price of ExxonMobil and Chevron, for example, rose by 2-3 percent.

Of course, there were also losers

As much as higher interest rates are good for the banking sector, they can be as unfavorable for real estate prices. This was also seen in the shares of real estate investment companies, among which a 5-10 percent drop was common. The representatives of the sector dealing with renewable energy also had to suffer substantial losses, here too it was not uncommon for a drop of more than 10 percent.