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What happened?

Equities rallied and bond yields rose on Wednesday as President-elect Donald Trump鈥檚 election victory fueled expectations of deregulation, tax cuts, and higher inflation. The S&P 500 gained 2.5%, bringing it to 5,929鈥攊ts 48th record closing high of the year鈥攚hile the 10-year US Treasury yield climbed 16 basis points to 4.43%.

At the time of writing, Trump has secured 295 electoral college votes, compared to Vice President Kamala Harris鈥檚 226, ensuring his victory. Republicans have also gained control of the US Senate for the first time in four years. In the House of Representatives, Republicans lead the Democrats, 206 to 191 and look likely to command a majority, though the precise outcome has yet to be determined. Harris called Trump on Wednesday to concede the 2024 US presidential race.

At a sector level, financials led gains on Wednesday, up 6.2%, amid hopes for regulatory relief, while the energy, industrials, and consumer discretionary sectors also posted strong gains. Small-cap stocks surged, with the Russell 2000 up 5.8%.

Elsewhere, the US dollar strengthened broadly against major currencies, including the pound, euro, and yen, and the VIX index of implied equity market volatility dropped to its lowest level since the end of September, reflecting market relief over a swift and decisive election result.

What to watch next?

The FOMC decision on 7 November. We expect the Federal Reserve to continue to move toward a neutral policy stance, and we do not expect it to immediately change its outlook given uncertainty around policy execution remains high. An additional 25-basis-point rate cut on 7 November looks highly likely, and in our base case, we expect another 25bp cut in December and 100bps of easing in 2025. At the margin, the Fed may slow the pace of rate cuts if it perceives that potential changes to migration, trade, or fiscal policy may lead to higher inflation.

China's fiscal stimulus. A Trump victory raises the probability of very large tariffs on Chinese exports to the US and challenges the outlook for Chinese stocks. At the same time, Chinese stocks are already inexpensive, and markets will be watching the outcome of the National People鈥檚 Congress (NPC) Standing Committee meeting on Friday to see if Beijing may increase and frontload stimulus spending in response. We keep a Neutral stance on Chinese equities for now.

Final seats in Congress. At the time of writing, the Republicans had already regained control of the Senate with 52 seats (51 needed to win), and with 397 of 435 races for the House of Representatives called, the Republicans have won 206 seats and the Democrats 191. In the weeks ahead, investors will be watching for the exact scale of the Republican majority in the Senate and whether a Republican majority in the House is confirmed. Narrow majorities could make it more difficult to pass fiscal legislation and raise the probability of gridlock following the 2026 midterm elections.

Policy statements from President-elect Trump. The outcome of the election has answered some questions but raised others. The uncertainty of a contested election, and the potential for higher corporate taxes and greater regulation, has been removed. But investors now face fresh uncertainty on trade tariffs, immigration policy, and geopolitics. President-elect Trump is likely to elaborate on his policy intentions in the coming days and weeks, which could create market volatility. However, it is worth remembering that during his first term, he used the performance of the S&P 500 as a barometer of his success.

What are the investment implications?

Markets have started to digest Trump鈥檚 victory, with the initial response pointing to expectations of stronger growth, higher inflation, a slower pace of interest rate cuts, and trade tariffs. As more detailed policy proposals emerge from the Trump transition team, investors should brace for further swings ahead. We advise investors to be ready to use any outsized market reactions to build stronger long-term portfolios.

In equities, we expect the S&P 500 to reach 6,600 by the end of 2025, from 5,929 at present, driven by solid US growth, lower interest rates, and enthusiasm over AI. Technology, utilities, and financials are among our preferred sectors. The key potential beneficiaries of deregulation鈥攆inancials and energy鈥攍ed the S&P 500 to a fresh record high on Wednesday. That was in line with our view that these sectors would likely outperform in the event of a Trump victory. The tech sector also advanced. The industry could face headwinds from trade tensions, but we do not believe this will outweigh the structural growth story over the medium term, including optimism over the accelerating commercialization of AI.

The risk of higher tariffs on Chinese exports to the US pushed the CSI 300 and Hang Seng benchmarks lower on Wednesday鈥攖hough declines were relatively modest, and both indexes rallied on Thursday. While we acknowledge the headwinds that tariffs could create, we note that China stocks are already inexpensive, and it is possible that Beijing may frontload stimulus spending more aggressively in response.

In fixed income, investors have initially focused on the potential that a more expansionary fiscal policy will contribute to higher inflation and a slower pace of Fed rate cuts. The 10-year Treasury yield has climbed from around 3.8% at the start of October to 4.43% as of Wednesday. In our view, the increase in yields has gone too far and offers a chance for investors to lock in attractive yields as the easing cycle continues.

In currencies, the US dollar gained renewed momentum from Trump鈥檚 win, with Wednesday鈥檚 1.7% gain in the DXY index the largest one-day advance in two years. However, we expect such gains to fade over the medium term. The dollar鈥檚 overvaluation and the US鈥檚 significant twin fiscal and current account deficits are likely to weigh on the currency over time. Investors should therefore consider using current dollar strength to diversify into other G10 currencies.

The price of gold eased from recent record highs. But looking ahead, we believe that higher deficits, geopolitical uncertainty, and continued central bank buying should lead to upside over the coming months. We have a USD 2,900/oz target for September 2025 versus USD 2,670/oz at the time of writing.

For more detail on our views on the implications of the election result for investors, please read our earlier publication: .