Rise and shine everyone.

Donald Trump has won the US Presidential Election. As expected, US Equity Futures are soaring, alongside the US Dollar. S&P 500 Futures have hit an all time high.

Given that he’s won by a wide margin, there is little reason to expect that there will be an issue with the results. The uncertainty has decreased significantly, and quite likely hedges will be gradually unwound after tomorrow, keeping in mind that we have the Fed’s rate decision tomorrow.

With a stronger dollar, commodities are not doing very well. Neither are bonds. Yields have shot up and the 10Y is closing in on that 4.5% mark that we talked about yesterday. Small caps are still rallying though for now, but it’s something to keep an eye on.

Energy stocks are up though. As is Tesla - up +15% in the pre-market. But, Financials are leading the way, followed by Energy and Industrials.

The Senate has also been taken by the Republican party and they are leading the votes for the House that far. 197 to 177, according to Bloomberg. If we have a Red Sweep, all this just intensifies.

Chinese stocks are already down, and a Red sweep will see price tumble further. We still have two days left for the NPC meetings and it’s quite likely that we will need to see some strong stimulus measure being announced, for this trend to reverse. A Trade War with China will certainly weigh on the economy, as it did before.

As for the US Economy, GS reminds us that the Fiscal Debt is projected to increase, if there is a Red Sweep.

Consequently, we may see inflation expectations increase and move even higher. The first call I got today was someone asking about what happens to interest rates. Well, it’s likely the Fed stays the course for now - 25 bps cut tomorrow and another 25 bps in December. January may be a hold. But, the overall picture is that the Fed may have to consider a shallower easing cycle that previously anticipated, i.e., a slower pace of cuts. I doubt the president-elect will able to sway them to the extent that we see more drastic cuts.

All things considered, we got the election results very quickly and now we can go back to trading the markets again.

Have a great day out there!

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)