Daily Market Color November 6, 2024Trump’s Election Fuels a Volatile, Risk-On Session Swap rates surge following Trump’s win. President-elect Donald Trump’s platform has been associated with both strong growth and inflationary pressures, and the Republican party’s likely congressional sweep increased the odds that his proposals are implemented. In turn, market reactions to the election results were pronounced across asset classes. Treasury yields climbed 6-18bps across a steepening curve and are now 40-90bps higher than their 2024 lows (reached in September). The dollar appreciated alongside the rise in rates, with the Bloomberg Dollar Spot Index up over 1.2%. Equities soared, with the S&P 500, DJIA, and NASDAQ hitting all-time highs. The three indices rose 2.53%-3.57%, led by the DJIA. Tesla led the “Magnificent Seven” with a 14.75% gain, driven by speculation that tariffs against China will eliminate significant competition. Meanwhile, Trump’s support for cryptocurrencies fueled Bitcoin’s surge to its all-time high, now just under $76k after hitting nearly $76,500 Fed readies for Trump. The Fed is set to announce their November rate meeting decision tomorrow, and markets overwhelmingly expect the FOMC to deliver a 25bp rate cut. While today’s election results will undoubtedly have long—term implications for monetary policy, Fed Chair Powell is unlikely to deviate from the apolitical script he’s stuck to throughout the year. Futures markets now expect the Fed Funds rate to be 25bps higher by YE 2025 versus before the election. Fed Ahead. Trump has implied that he won’t re-appoint Chair Powell, though he told Bloomberg in July that he may tolerate Powell serving out his term as Fed governor, “especially if I thought he was doing the right thing.” Trump could move to restrict the authority of Vice Chair for Supervision Michael Barr, the torch bearer of a bank-capital proposal that has been sharply criticized by the banking industry and Republicans. Trump has expressed a desire to be more involved in Fed decision-making, but it’s still unclear what that means from a policy standpoint.
