With voting now completed across the continental United States, it is confirmed that Donald Trump is making a comeback to the White House.
The former President outperformed poll averages, particularly in key states, where he won more votes than expected, echoing the surprises of 2016 and 2020.
Anticipating a Trump win, US 10-year bond yields have surged 15 basis points to 4.4%, near the long-standing fair value of 4.5%. But yields could even have further upside, especially if post-election stimulus takes shape in early 2025.
While election results dominate investors’ attention, the upcoming Fed meeting today and tomorrow should not be overlooked. This event could introduce two-way volatility into bond markets in the near term, related not only to the 50 basis points in rate cuts still expected by markets through year-end, but also to the prospect of an end to quantitative tightening.
Moreover, with the National People’s Congress Standing Committee meetings ongoing this week, the risk of China stimulus acting as an additional catalyst to global as well as US bond yields compounds the challenges facing investors.
Replicating the 2016 post-election rally, S&P futures rose by 1.3% overnight. As higher bond yields begin to bite, equity investors should similarly focus on risk management amidst elevated valuations and optimistic earnings expectations for 2025.
However, Trump’s victory introduces potential volatility and uncertainty as the year ends, with complications looming from his scheduled 26 November sentencing for felony convictions in New York state.
