How Trump's Win Moved the Markets

In partnership with

Trump is once again President-Elect of the United States.

If you’re hoping for political opinions today, you will be disappointed.

Instead, we are taking a sober look at how the markets moved in the 2 weeks following Trump’s win. We’ll look at:

• Stocks

• Bonds

• Currencies

• Bitcoin

And most importantly, we’ll discuss why this is happening, what we’re watching for, and what this might mean for our investments in 2025 and beyond.

There’s also a very important meeting that happened after the election that we need to discuss as well…

Let’s dive right in.

Stock Market Rallies, Then Sells Off

Following Trump’s win, the S&P500 rocketed close to 300 points, going from ~5700 to ~6000.

But then, the stock market started to correct. And much of that excitement has practically been drained out of the market. Only until this week has it started to trickle up again.

Why?

Initially, investors were very excited about the prospect of lower corporate taxes, reduced regulation, and a president that has been campaigning on a bold promise of economic prosperity.

The following drop-off could be due to heightened uncertainty around Trump’s incoming administration.

But there’s something else happening here that we’ll discuss shortly 👇

Bond Yields Rise

Bonds are a bit more complex compared to the stock market, but they are a critical measure of investor expectations.

To simplify things, we’ll look at the 10 Year Bond Yield, which you can think of as the market’s expectations for inflation over the next 10 years.

The 10 Year Yield has increased from ~4.3% to ~4.4%.

Why?

Simply put, the market expects more inflation over the next 10 years as the economy strengthens and the Fed is forced to lower rates. Have you guessed what this other event is yet?

The US Dollar Strengthens

When assessing the strength of the dollar, investors often look toward the DXY index, which compares the US dollar to a basket of 6 foreign currencies.

It’s clear that the dollar has been strengthening since the US election.

Why?

Investors expect a combination of fiscal stimulus by the Trump admin, as well as restrictive trade policies (e.g. tariffs) that could weaken foreign currencies relative to the US dollar.

Bitcoin Continues To Rally

Bitcoin went on an absolute tear, climbing over 30% since the election.

Usually when the stock market rallies, Bitcoin rallies with it.

As discussed in last week’s video, risk assets are generally correlated. The stock market is considered a risk-on asset, and Bitcoin is very much a risk-on asset.

So it’s particularly interesting that when the S&P500 fell last week, Bitcoin did not.

There’s so much to discuss on this topic that it deserves an article and video of it’s own. So subscribe to Wealth Potion so you don’t miss out.

So it seems pretty straightforward - the markets are generally bullish on a Trump presidency.

But we’re left with a few loose ends:

• Why did the stock market lose most of its gains last week?

• Why are bond yields rising, and bond prices falling?

• Why does Bitcoin continue to rally?

The markets are incredibly complex and I don’t claim to be able to explain everything that contributed to this.

But there is an important event that occurred just after the election that give us more perspective.

FOMC Meeting and Inflation Data

Two days following the election, on Nov 7 and 8, the Federal Reserve held their November meeting.

There, Jerome Powell announced that they are lowering the Federal Funds rate by 0.25% - following their most recent rate cut of 0.5% back in September.

As a reminder, the Federal Reserve hiked rates in 2022 and 2023 to combat inflation.

They are now lowering rates again, signalling that they no longer see inflation as problem.

Good news, right?

It was… until Nov 13, when the Bureau of Labor Statistics released the latest slew of inflation data.

Year-over-year inflation is still higher than the Fed’s inflation target of 2%, and inflation is still ticking up month-over-month.

Why does this matter?

Because the markets are losing confidence in the Federal Reserve’s ability to control inflation.

Remember that the 10 Year Bond yield is >4.4%!

This means that the bond market foresees inflation to be closer to 4.4% over the next 10 years.

Can the Fed bring inflation down to 2%, and keep it there?

Of course they could. But the market is calling JPow’s bluff, and saying that the victory over inflation won’t last.

What We’re Watching

As mentioned, inflation data will be critical to watch.

And although it is the long-term trend that ultimately matters, small deviations and changes in direction in the inflation data will be a signal to the markets.

Here’s one example scenario:

1. Imagine hypothetically that the December inflation print surprises to the upside

2. Surprise inflation will signal to the market that the Fed does not have inflation under control

3. Inflation suggests the Fed should be hiking rates, but they are cutting

4. This would be very bearish for asset markets

Conversely, if inflation continues to come down, we can likely expect asset prices to continue to climb (all else being equal).

One other thing we’ll be watching for over the coming weeks:

Who Trump appoints to Treasury Secretary.

Janet Yellen is the current Treasury Secretary, and she has been a very important (albeit subtle) player in the global economy.

We’ll definitely do a retrospective on Janet Yellen’s performance as Treasury Secretary, especially the very… creative tactics she has been using in the bond market to stimulate the economy.

So who’s next?

As of right now, the betting markets are showing a tight race for Trump’s appointment:

• Scott Bessent - The fund manager favorite. Many institutional investors on FinTwit (the X community of finance nerds like me) are voicing their support for Bessent.

• Kevin Warsh - The conservative hawk. The most “establishment” pick of the three, Kevin would likely be much more hawkish and prioritize tackling inflation in a Volcker-esque manner.

Obviously, there is a ton happening in the markets (and the world) these past few weeks. And this introduces a bunch of potential topics for future articles.

I’ll likely cover all these topics eventually, but which one are you most interested in?

At the end of the day, Wealth Potion exists to serve you as the reader, and to level up your financial knowledge. Your feedback means a lot.

To your prosperity,

Brandon @ Wealth Potion

Start learning AI in 2025

Everyone talks about AI, but no one has the time to learn it. So, we found the easiest way to learn AI in as little time as possible: The Rundown AI.

It's a free AI newsletter that keeps you up-to-date on the latest AI news, and teaches you how to apply it in just 5 minutes a day.

Plus, complete the quiz after signing up and they’ll recommend the best AI tools, guides, and courses – tailored to your needs.

Sign up to start learning.

Build in Public Update

I feel like I’m getting into a groove with my YouTube uploads.

• I’m making fewer mistakes speaking to the camera

• My flow is feeling more natural, and I’m receiving positive feedback from viewers

• I’m getting faster at video editing and creating thumbnails

With the holidays coming up and a bunch of travel, I’m going to use the next few weeks to record a backlog of videos that I can publish through the holidays.

Then, when I’m back in Korea in January, I plan on trying to do 2 videos per week.

The reason is simple:

If it takes 250 videos to master YouTube, I’ll be able to get there in 2.5 years instead of 5 years.

Lots more I can do with Instagram, TikTok, X, etc. which I’ll be noodling on as well. Always open to your ideas and feedback.