Trump’s Win Ignites Wall Street Rally: A Full Risk-On Market Reaction

Wall Street Rallies on Trump’s Election Victory, Fueled by Investor Confidence in Pro-Business Policies and Fiscal Stimulus Prospects

Editorial Team (ET)July 12, 2025

The recent U.S. election sent shockwaves through financial markets, with Wall Street responding in a full "risk-on" mode following Donald Trump's victorious return to the White House. Amid the electrifying outcome, U.S. stocks surged, interest rates spiked, and the dollar strengthened as investors bet on the continuation of Trump's pro-business policies. This article explores how various markets and key financial indicators reacted to Trump’s win and the implications for the investment landscape moving forward.

An Immediate Market Reaction to Trump’s Win

When the election results emerged, the markets quickly reflected investor sentiment, as major U.S. indexes shot up in premarket trading. The S&P 500 futures leaped by over 2%, showcasing investor confidence in Trump’s economic agenda. Among the standout performers, small-cap stocks led the charge, attracting substantial interest from investors with their potential for rapid growth under anticipated fiscal stimulus measures.

The VIX Index, known as Wall Street’s "fear gauge," showed a significant decline as the election anxiety dissipated. Sliding below 16, the VIX mirrored the calming effect of a decisive election result, bringing relief to traders and reinforcing a favorable environment for equities.

While U.S. equities rallied, the dollar posted its largest gain against other major currencies since 2020. Investors flocked to the greenback as a safe haven, and the currency’s strong performance added to the optimistic market sentiment. In the cryptocurrency sphere, Bitcoin reached a new record high, underscoring the bullish sentiment sweeping across risk assets.

Market Analysis from Key Financial Experts

Ryan Grabinski on Market Certainty and Consumer Confidence

Strategas Securities’ Ryan Grabinski emphasized that the clarity brought by Trump’s clear win has injected much-needed certainty into the market, which often craves stability. According to Grabinski, this boost in confidence among businesses and consumers alike could fuel economic growth and spur further investment, especially in sectors sensitive to interest rates.

Michael Strobaek’s Perspective on Trump’s Landslide Victory

Global CIO at Lombard Odier, Michael Strobaek, noted the impact of a "landslide victory" that reassures markets and supports a "fear of missing out" phenomenon among investors. Strobaek warned, however, that despite the current upswing, markets may temper enthusiasm as they approach all-time highs.

Michael Kantrowitz on Deregulation and Corporate Tax Prospects

Piper Sandler’s chief investment strategist Michael Kantrowitz pointed out that while rising interest rates typically weigh on equities, the potential for Trump’s deregulatory approach and lower corporate taxes may offset this burden, making the current rally sustainable in the short term.

Trump’s Policy Agenda and Market Implications

Investors anticipate that Trump’s victory could usher in a new wave of tax cuts and regulatory rollbacks. These policies, beneficial for business profitability, are driving optimism in equity markets as companies anticipate lower costs and enhanced margins.

With Trump back in the White House and Republicans holding the Senate, fiscal stimulus measures are back on the table. Experts suggest that increased government spending could drive economic growth, particularly benefiting sectors like infrastructure, manufacturing, and defense.

Bond Markets Respond to Trump’s Election Win

One of the most notable reactions in the bond market came from the U.S. 10-year Treasury yield, which surged to a four-month high. Higher yields reflect investor anticipation of inflationary pressures from Trump’s spending plans and potential Fed rate hikes, signaling a shift toward tighter monetary conditions.

Max Kettner on the Danger Zone for Treasury Yields

Max Kettner from HSBC Global Research highlighted the potential challenges if 10-year Treasury yields rise into the “danger zone.” If yields surpass a certain threshold, they could dampen the positive impact of Trump’s policies on equities, curbing market enthusiasm.

Wall Street's Sector Winners and Losers

Small-cap stocks emerged as the early winners in the post-election rally. Due to their sensitivity to domestic policies and economic cycles, these companies stand to benefit the most from Trump’s stimulus plans, deregulation, and tax cuts.

While technology stocks also rose, their gains were more tempered compared to other sectors. Analysts attribute this to the sector's growth over the past few years, positioning it for a slower growth trajectory under a potential rise in interest rates.

Potential Pitfalls and Long-Term Considerations

Risks of Sustained High Yields for Equities

Keith Buchanan from GLOBALT Investments warns that while equities are soaring today, sustained high yields could ultimately pose a risk for riskier assets. If the Fed signals more aggressive rate hikes in response to fiscal policies, it could pressure stocks in the medium to long term.

Midterm Elections Could Temper Market Gains

The future balance of power in the House remains in flux, and a Democratic win could limit Trump’s legislative power. As Dave Lutz of JonesTrading notes, if Democrats gain control, some of Trump’s policies could face hurdles, potentially curtailing the ongoing rally.

The Federal Reserve’s Role Amid Trump’s Win

Rate Cuts Expected as the Fed Convenes

Adding to this week’s financial drama, the Federal Reserve’s upcoming policy meeting could bring a new layer of complexity. Markets widely expect a quarter-point rate cut, which could impact how risk assets respond to Trump's victory.

Kevin Gordon on Stocks and Rising Yields

Kevin Gordon from Charles Schwab & Co. speculates on the potential effects of Trump’s presidency on the stock-yield relationship. He suggests that if yields continue to rise alongside stocks, it may indicate a strong vote of confidence in growth rather than inflation concerns.

Conclusion: Trump’s Victory Ushers in a New Era for Markets

As Donald Trump embarks on his second term, Wall Street’s immediate reaction reflects optimism tempered with caution. The pro-growth policies championed by Trump are breathing life into equities, the dollar, and bond yields. However, investors remain vigilant, aware that rising yields and possible political challenges could impact this initial surge. Moving forward, market watchers will look to the Federal Reserve’s moves and the midterm election outcomes as key indicators of long-term stability. For now, Wall Street seems ready to embrace Trump’s win with a “risk-on” approach, but the true test will be in sustaining these gains amid the potential headwinds.

Wall StreetDonald Trump

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