Dollar and yields at multi-month highs

Trump's victory supported the price of the US dollar against most currencies. Its price even climbed to a four-month high just after the election.* The reason for the sharp rise is the protectionist policy of the new president. This is aimed at boosting the domestic economy with higher tariffs on imported products, lower taxes on companies and other regulations, along with limiting the flow of illegal migrants into the US, which, according to information published by Reuters, raises concerns about rising inflation, the national debt and the possibility that the Fed will subsequently slow down or stop cutting interest rates altogether. Futures on the Dollar Index (DXY), which tracks the dollar against other major currencies, rose nearly 2 percent to about $105.30 on Wednesday, Nov. 6, 2024.* The rise was partly driven by a rise in U.S. Treasury bond yields. For example, the yield on the 10-year Treasury note was up nearly 4.5 percent on the same day. In both cases, these were the highest levels since the beginning of July this year. A few days later, on November 11, 2024, the dollar index rose to $105.42, and the yield on the 10-year Treasury note saw a slight correction to 4.3 percent.*

Evolution of the price of the dollar index futures over the last 5 years (source: Investing.com)*

Evolution of the value of yields on 10-year US Treasury bonds over the last 5 years (source: Investing.com)*

The yellow metal suffered

The rise in the value of the dollar and the waning of nervousness ahead of the election have put the record gold rally of recent months on hold. Following the release of the results, the precious metal lost 3 percent of its value during Wednesday's trading. Gold futures fell to $2,676. The spot price was at $2,659, losing 5 percent of its value from its late October highs. However, the day after the Fed cut rates by another 0.25 percent, the gold price rose more than 1 percent, erasing some of the previous day's losses. Despite the short-term gain, however, it held at lower price levels early in the new week.* Gold is considered a safe haven during economic uncertainty, but gains in the dollar and rising bond yields caused a correction. However, the effect of the election is unlikely to have a longer-term impact on the markets and the ongoing geopolitical tensions and economic data will again be more important for the financial markets. The precious metal may also find support in the December Fed meeting, when the probability of a rate cut is 68.8 percent according to the CME Fed Watch Tool . [1]

Evolution of the gold futures price over the last 5 years (source: Investing.com)*

Spot gold price over the last 5 years (source: Investing.com)*

Bitcoin at an all-time high

Cryptocurrencies were also positively affected by the victory of the Republican candidate. Bitcoin added 11 percent during election day and the following day, reaching a new high of more than $75,500. In the following days, the cryptocurrency grew with a gain of another 8 percent, reaching a record high of USD 82,316 on Monday, November 11, 2024.* These values were mainly helped by Trump's "crypto-positive" campaign. In it, he promised to keep existing government reserves of Bitcoin, to fire the chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, who has taken a tough stance on the sector in terms of regulations. As reported by CNCB, populist statements about mining digital gold exclusively in the US and policy promises have also helped, boosting the industry's hopes for a more favourable regulatory environment under his administration.

Bitcoin price evolution over the last 5 years (source: Investing.com)*

Positive sentiment in the US, Europe and China are uncertain

The US stock market also posted gains. On Wednesday after the results were released, the S&P 500, NASDAQ and Dow Jones indices opened the trading day with gains ranging between 2 and 3 percent. All continued to rise in the following days and reached new highs, with the NASDAQ at 19,286 points, the S&P 500 at more than 6,000 and the Dow Jones at 44,380 as of 11 November 2024.* While the US market was in a positive mood, Europe and China did not share this optimism due to the potential introduction of higher tariffs on imports. Post-election gains in European indices were replaced by losses later in the day and index performance in China was mixed.

Price performance of the S&P 500 index over the last 5 years (source: Investing.com)*

NASDAQ index price development over the last 5 years (source: Investing.com)*

Dow Jones price trend over the last 5 years (source: Investing.com)*

The outlook supported some sectors

Shares were buoyed by optimism that Trump's policies could stimulate economic growth, cut taxes and possibly increase infrastructure spending. Lower regulations and a positive stance on fossil fuels have boosted shares of companies in sectors such as energy, banking and technology. The market darling, Nvidia (NVDA) rose to a new high on November 7, 2024, which also propelled it to the top spot in market capitalization The company's value was more than $3.6 trillion, surpassing even Apple and Microsoft. The Republican win also helped Tesla (TSLA), whose CEO is a known supporter of the new president. Shares of the electric car maker rose sharply after the election, with further gains in the days that followed, taking them to a 2-year high.

Share price development of Nvidia Corp. over the past 5 years (source: Investing.com)*

Tesla Inc. share price evolution over the last 5 years (source: Investing.com)*

Green investments in the red

Clean energy stocks saw a sharp decline, with solar and wind companies being the hardest hit. It is widely known that Trump is a supporter of fossil fuels, while he has labelled climate change a hoax and ordered the US to withdraw from the Paris climate agreement. However, the falls were probably just a panicked reaction by traders. Despite Trump's statements about repealing Biden's climate bill, this is unlikely to happen, as the regulation has support even in states where many Republican leaders have said they will defend it. The global market has also reacted to the potential changes and companies in Europe have also seen a decline. Despite the uncertainty, demand for renewables remains strong thanks to technological advances and initiatives to reduce the impacts of climate change. [2]

Olivia Lacenova, principal analyst at Wonderinterest Trading Ltd.

* Past performance is no guarantee of future results

[1], [2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.