Decisive victories in US general elections often trigger the start or reactivation of major market trends. The emerging victory of President Trump and the Republicans in both Houses of Congress suggests we will likely see the reactivation of powerful bullish trends in stock markets, cryptocurrency, and the US Dollar. Read on to learn more about the election results and how to trade them.
Trump Wins the Presidency
Opinion polls had suggested the Presidential race between Trump and Harris was neck and neck, especially in the swing states which would determine the outcome. The consensus forecast was that Harris would almost certainly win the popular vote by a small margin, but that Trump would have a small edge winning the crucial electoral college. This was essentially my forecast yesterday, which was decisively wrong.
The actual result is now becoming clear: Trump has not only become the first Republican Presidential candidate to win the popular vote in 20 years, but also won all the swing states, mostly by margins between 3% to 5%. This suggests all the major pollsters were wrong and underestimated Trump’s support.
There will no dispute over the result of the Presidential election, and that Trump will be able to exert power quickly and begin putting together his team while preparing to assume office on 20th January 2025.
A Trump victory, especially this decisive victory, is likely going to be positive for the following assets:
- The US stock market, represented by indices such as the S&P 500 and the NASDAQ 100.
- Global stock markets generally.
- The US Dollar.
- Cryptocurrency, especially Bitcoin as the major cryptocurrency.
It will be wise to position along these lines for the medium to long term, especially in stock markets. In the short term, we are seeing some retracements against the momentum in the Trump trade, but this new trend will likely reassert itself. For short-term trading, timing becomes extremely important.
In the Forex market, the most interesting currency pair will probably be the USD/JPY currency pair.
Republicans Will Win Both Houses of Congress
The icing on the cake for President Trump in his hour of victory will be his fellow Republicans taking control of both Houses of Congress by winning control of the Senate off Democrats. The Republican majority in the Senate will be narrow but will probably give President Trump a lot of room to act in his preferred ways regarding his appointments and regarding foreign policy.
This Republican control of Congress should also have the effect of making the “Trump trade” outlined above an even better prospect.
Buy the Rumour, Sell the Fact
It is worth noting that the stock market could go much, much further than the US Dollar is likely to. So, the first and most obvious way to position yourself for a Trump presidency is to get long of the US stock market, or if already long, to add to your position.
In the Forex market, the principle of “buy the rumour, sell the fact” may already be in play, so the US Dollar may not make any more gains over the near term. Timing is much harder to get right in the Forex market compared to stock market indices when you get a major political change.
Conclusion
The results of yesterday’s US general election likely will trigger renewed bullish trends in US stock market indices, Bitcoin, and the US Dollar – in that order of magnitude.
Investors and longer-term traders should consider taking long positions in the S&P 500 or NASDAQ 100 Indices and maybe also Bitcoin.
Shorter-term traders should look for opportunities in these same places, and long USD, with the USD/JPY currency pair likely to be a suitable vehicle for that.