How Markets Reacted to Democrats’ Win: Stocks U-Turn, Gold Gains
Global stock markets erased a selloff sparked by a Democratic sweep of the US Congress, as uncertainty surrounding the midterms faded and dip-buyers rushed back into a bruised market.
Equities reversed earlier losses, trading firmly in the green, while Treasuries rallied with gold. Investors are reassured the results aren’t likely to swiftly change the status quo, with opportunities opening up in different parts of the market which had sold off recently, like technology.
President Donald Trump congratulated Democrats for doing “a good job” after they inflicted devastating losses on his Republican allies, winning back both houses of Congress and picking up several governors’ mansions.
“While the present uncertainty and changing of the guard might make investors anxious, no US midterm election has ended the world, and this one will not either,” said Steven Chiavarone, chief investment officer for Global Equities at Federated Hermes. “We are looking past the noise, focusing on the real opportunities due to strong economic growth, significant infrastructure buildout and what may be the earnings cycle of our lifetime.”
Here’s a look at how markets reacted to the election results:
US stock futures have turned positive as some of the biggest risk events facing markets move into the rearview: a Federal Reserve decision that left rates unchanged, an earnings season that delivered strong growth despite concerns over artificial intelligence capex and midterm elections that are unfolding in an orderly fashion.
Technology stocks in particular were sold off heavily in the lead up to the vote as concerns about overspending on AI grew. The Nasdaq 100 entered a correction on Monday, but contracts on the tech-heavy benchmark erased losses of as much as 2.4% to advance 0.9%.
European stocks extended their recent outperformance, with the Stoxx 600 advancing more than 1%. The benchmark had beat the S&P 500 in October as investors rotated out of the AI trade and into more defensive sectors. In Asia, the Kospi Index erased a drop of as much as 4% on Wednesday, with Samsung Electronics Co. and SK Hynix Inc. down less than 1% each. Taiwan’s Taiex Index also trimmed its drop to 0.8%.
There were pockets of underperformance, however. Defense stocks were hit as investors revised down their bets on a further ramp-up in military spending. The shares of Republican megadonor Elon Musk’s Tesla Inc. and Space Exploration Technologies Corp. declined about 3.5% each ahead of Wednesday’s open.
Renewable stocks rallied in Asia, Europe and US premarket as investors see a Democratic wave as supportive of companies in the clean energy supply chain, including solar and batteries, at the expense of the traditional energy sector.
Denmark’s Orsted A/S, an operator of offshore wind farms, and SMA Solar Technology AG both rose more than 8%. Vestas Wind Systems A/S also advanced about 5% in early European trading.
In Asia, South Korea’s Hanwha Solutions Corp. surged 19%, while HD Hyundai Energy Solutions Co. and OCI Holdings Co. jumped 12% and 10%, respectively. Solar names in the US, such as Enphase Energy Inc., SolarEdge Technologies Inc., First Solar Inc. and Sunrun Inc. advanced in premarket trading.
Among other sectors, banks soared in Europe as investors rotated back into a favored trade, while basic resources stocks rallied with metal prices.
The dollar slid against all Group-of-10 peers on concerns that a Democratic sweep could chip away at the US exceptionalism story, particularly if greater scrutiny of AI investment weighs on growth. A Bloomberg gauge of the greenback fell as much as 0.5%, the most in two months.
Treasuries gained, with yields falling across the curve as investors bet a Democratic Congress could constrain Trump’s tax and spending agenda, reducing the prospect of fiscal stimulus and additional borrowing.
Five-year yields dropped as much as nine basis points to 4.67%, while the 10-year yield fell seven basis points to 4.89% before paring the decline.
European government bonds rose, although not to the extent seen in Treasuries. German 10-year yields fell one basis point to 3.32%, while their UK peers dropped three basis points to 5.23%. The premium on French debt over German counterparts — a gauge of risk in the region — slid four basis points to 158 basis points. The euro gained 0.5% versus the dollar to 1.1253 while the pound fared slightly better, climbing 0.6% to 1.3489.
Cryptocurrencies were mixed as the results cast doubt over the path for industry-backed legislation.
Trump has been a vocal supporter of the sector, pledging to make the US the “crypto capital of the world,” establish a strategic Bitcoin reserve and ease regulatory pressure — fostering a friendlier environment for digital assets.
Bitcoin fell as much as 2.8% to below $76,000 as election results came in before rebounding. Crypto was already under pressure from outflows from Bitcoin spot exchange-traded funds and the fallout from last week’s record Binance hack.
Gold jumped as much as 3.1% in the biggest gain since August as the dollar and Treasury yields fell. Lower yields benefit gold as it doesn’t pay interest, while a weaker US currency makes the metal more affordable for most buyers.
Bullion traders are assessing whether the strong Democratic showing could constrain Trump’s fiscal agenda and curb expectations for further spending. Prices rose to above $4,000 an ounce, erasing a modest retreat in the previous session.
Get Latest real-time updates
Catch all the Business News , Market News , Breaking News Events, JIO IPO Listing Today LIVE and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
✕
Wait for it…
Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.