There have been signs that markets have been beginning to anticipate Donald Trump’s election victory for quite a while.

There have been signs that markets have been beginning to anticipate Donald Trump’s election victory for quite a while. The possibility that he might win probably accounts for some of the strong stock-market performance seen since September as well, in part, for rising bond yields at the longer end (ten years and beyond) in the wake of the Fed’s recent 50 basis point rate cut. Those rates rose again on Wednesday with the yield on the ten-year treasury hitting 4.44 percent.

I wrote about rising long-term rates on October 22, noting, among other possibilities, that “increasing speculation that Donald Trump might win in November [might] also be playing a part. He’s regarded as more likely to pursue an expansionary policy than Kamala Harris.” That would increase inflation risks as, for that matter, would higher tariffs, which would push prices up for Americans.

But even if some market players had thought a Trump victory was on the way, others, quite clearly, had not been so sure. The S&P was up 2.5 percent on Wednesday, which, according to data compiled by Bloomberg and Birinyi Associates was the best post-election day in the index’s history. The Dow was up 3.5 percent, and the tech-heavy NASDAQ was up by 2.7 percent. Something that may have helped push up stocks further was the fact that Trump won so clearly. There had been widespread worries about weeks or more of lawfare over the election results, a potential source of instability and uncertainty, which markets would not have appreciated. A decline in the VIX, the volatility index sometimes known as the fear index, also reflected relief over a clear election result, as did a weaker gold price.

The rally in stocks was broad-based, with, given Trump’s emphasis on growth, investors anticipating the effects of a strong economy, lighter regulations, and the avoidance of Biden-style tax hikes. The likely end of the FTC’s ideologically driven anti-merger stance was something else to celebrate.

Among sectors that did notably well were banks (winners from higher interest rates), the real-estate sector (losers from higher interest rates), tech, and small caps. One major area of concern is that Trump might impose large tariffs, and anxiety over that was why some exporters were weak as well as some retailers.

Tesla was strong, benefiting from the belief that Elon Musk’s close relationship with Trump won’t exactly hurt the company. What Trump’s approach will be to the subsidies and other spending supporting a broader EV market in the U.S. has yet to be seen. Ideally, they would be scrapped, but the growing woes of the auto sector and the location of IRA-financed “investment” in a U.S. EV sector (much of which has been in red states) mean that the politics of scrapping that regime are not straightforward.

It is, however, hard to see the new administration accepting the continuation of EPA mandates designed to squeeze out sales of new traditional cars. Trump is known (understandably) to be skeptical of wind energy, and wind-power stocks took a battering in overseas markets. Solar stocks took a hit in the U.S., but oil stocks rose. If it’s growth that the new president is after, withdrawal from the “race” to net zero would be one easy step. There are smarter, cheaper, and less destructive ways to face the challenge posed by a changing climate.

The dollar, which had been rising for a month or so, rose again, with the dollar index (which tracks the performance of the greenback against a basket of currencies) moving up by 1.5 percent. This was a vote of confidence in the incoming administration that (in part) tracked the rise in interest rates that, as mentioned above, also owed something to expectations of a Trump victory. Bitcoin and other crypto assets soared: Trump is seen as a supporter of cryptocurrencies.

The darkest clouds on the horizon are clearly rising interest rates, which of course also increase the cost of the government’s borrowing (the problem of U.S. indebtedness has not gone away), the concern over tariffs (oil, copper, and other commodities were down over fears of what they could mean for global growth), and what to do about the IRA generally and, more specifically, faltering automakers dependent on subsidies to encourage the manufacture the EVs for which demand has been . . . disappointing.