In the vein of the 2016 playbook, the market is seeing both exuberance and caution in light of president-elect, Donald Trump’s landslide victory against Kamala Harris. The rally was seen in a speculative high in the equities market, namely the Dow Jones Industrial Average, which surged 1,263 points to a record high, around 3%. An event that hasn’t occurred since late 2022. The S&P 500 jumped 1.8% and the Nasdaq composite followed suit with a 2% gain.

In the equities market, there appears to be optimism surrounding consumer discretionary stocks, as investors anticipate more potential Fed rate cuts in the near future that could support consumer spending, despite signals from the bond market suggesting inflation on the distant horizon. Rising energy costs, possibly driven by foreign conflicts, add a layer of caution, as higher fuel prices could weigh on consumer sentiment and broader economic growth.

Tesla, a beneficiary of Trump in terms of the Musk/Trump nexus, saw shares rally at 13%. The small cap benchmark, Russell 2000, saw a rise of 4.5% and the S&P 600 saw a whopping 5% gain. 

“For now, investor sentiment is pro-growth, pro-deregulation, and pro-markets, as seen in the overnight market action,” David Bahnsen, chief investment officer at The Bahnsen Group. “There is also an assumption that M&A activity will pick up and that more tax cuts are coming, or the existing ones will be extended. This creates a strong backdrop for stocks.”

Bitcoin, which has been HODL in fears of looming regulation, soared to an all-time high of $75,000 accompanied by the dollar index which rose to its highest level since July. All hopefully inebriatory sentiment towards deregulation and protectionism. 

Sentiments reflected in the treasuries market as pessimistic forebodings with yields up across the board indicating a rash of inflation out of an exacerbated trade war on the horizon and a still inverted yield curve. Some investors see his trade policies as a detriment to the domestic economy and to the national deficit which has now reached $1.8 Tn.

“We are renormalizing the yield curve. We’re gonna have more and more demand for longer-dated maturities. The U.S. has a big maturity wall in some respects. … We’re gonna need to roll out our debt,” Cohn, the former chief economic advisor to Trump, said Tuesday during a CNBC special.

Bond volatility, as measured by the ICE BofAML MOVE index, has hit a 13-month high, a level rarely seen outside of crisis conditions. Meanwhile, stock volatility, as shown by the Cboe Volatility Index, has dropped by 21%.