Wall Street experienced a significant shift towards risk aversion following Donald Trump’s recent election victory, driven primarily by concerns surrounding potential tariff increases and sweeping changes to trade policy. The anxieties are further fueled by the anticipated appointments to key positions within the incoming administration, including potential choices like Senator Marco Rubio for Secretary of State and Representative Mike Waltz for National Security Advisor—both known for their hawkish stances on China and NATO. This has led to a notable market downturn, impacting major indices and several key sectors, while simultaneously boosting the dollar’s value as a safe haven asset. Adding to the uncertainty, investors are anxiously awaiting crucial inflation data scheduled for release this Wednesday, with projections suggesting an annual rate of 2.6% for October. This confluence of factors paints a complex picture for the immediate future of the US and global markets.

Wall Street Jitters: Trump Win Sparks Market Volatility

• Market downturn: Major US indices saw declines, with small caps performing particularly poorly. The Russell 2000, a benchmark for small-cap stocks, fell by a significant 1.5%.
• Geopolitical concerns: Potential appointments of hawkish figures in the new administration raise fears of heightened trade tensions, especially with China, leading to uncertainty and investor apprehension.
• Inflation anxieties: The impending inflation data release (projected at 2.6% annually) adds further pressure, influencing market sentiment and monetary policy expectations.
• Safe-haven flows: The dollar strengthened, reflecting its status as a safe-haven currency amid growing geopolitical and economic uncertainties.

Impact on Major Market Indices and Sectors

The market’s response to the electoral outcome was swift and widespread. None of the major US equity indices showed gains during midday trading in New York. The Nasdaq 100 dipped slightly by 0.2%, the S&P 500 fell by 0.3%, and the Dow Jones saw a more substantial drop of 0.5%. The underperformance of small-cap stocks, as indicated by the Russell 2000‘s 1.5% decline, is particularly noteworthy, suggesting a higher level of risk aversion among investors. Ten out of eleven S&P 500 sectors traded in negative territory, only consumer staples showing minimal growth. This widespread negative sentiment highlights the pervasive nature of the market’s response.

Further Breakdown of Index Performance

A closer examination reveals significant shifts within specific sectors. Benzinga Pro data showed that the SPDR S&P 500 ETF Trust (SPY) decreased by 0.4%, mirroring the broader market trend. Similarly, the SPDR Dow Jones Industrial Average (DIA) fell by 0.7%, while the tech-heavy Invesco QQQ Trust Series (QQQ) experienced a slight decline of 0.4%. The iShares Russell 2000 ETF (IWM) suffered a more pronounced drop of 1.6%, further emphasizing the weak performance of small-cap stocks. Notably, the Consumer Staples Select Sector SPDR Fund (XLP) bucked the trend, rising 0.1%, potentially reflecting its status as a defensive sector during times of uncertainty. However, this was offset, in part, by the Materials Select Sector SPDR Fund (XLB), which lagged behind, falling 1.6%.

International Market Reactions and Currency Shifts

The impact extended beyond US borders, with Chinese stocks experiencing substantial declines. Major US-listed Chinese companies saw drops ranging from 5% to 9%, reflecting worries about potential future tariff imposition by the incoming administration. This underlines the interconnectedness of global markets and the heightened sensitivity to changes in US trade policy. The Japanese yen weakened, falling past 154.7 per dollar – completely reversing gains from the Bank of Japan’s August intervention. The Chinese yuan and the euro also weakened against the dollar, with the euro falling below $1.06.

Dollar Strength and Yield Curves

The US dollar gained strength, reaching its highest level since May 2024 on a currency-weighted index. This reflects the dollar’s status as a safe-haven asset during times of geopolitical and economic uncertainty, with investors flocking to it as a means of preserving capital. This strengthening of the dollar simultaneously contributed to the decline in the price of gold, an asset often considered a hedge against inflation and economic uncertainty. The increase in Treasury yields, with the 10-year Treasury yield rising eight basis points to 4.42%, further impacted the market, pushing down the price of bond ETFs such as the iShares 20+ Year Treasury Bond ETF (TLT) by 1.2%.

Cryptocurrency and other Asset Class Performance

The cryptocurrency market also felt the effects of the broader market downturn, with Bitcoin (BTC/USD) falling by 1.6%. This demonstrates that the apprehension spreading through traditional equity markets is also impacting alternative asset classes. The decline in Bitcoin can partially be attributable to the flight to safety seen in the strengthening of the US dollar and rises in government bond yields.

Earnings Reports and Market Outlook

Several companies reported earnings, showcasing a mixed bag of performance. Home Depot Inc. (HD) saw a slight dip of 0.5%, while Shopify Inc. (SHOP) experienced a remarkable surge of 26%, indicating strong performance despite broader market concerns. Tyson Foods Inc. (TSN) also saw a significant increase of 9%, likely reflecting positive investor sentiment towards the company’s results. Live Nation Entertainment Inc. (LYV) also showed robust performance with a 4.4% increase. The results of Spotify Technology S.A. (SPOT), Occidental Petroleum Corp. (OXY), Flutter Entertainment plc (FLUT), Natera Inc. (NTRA), and CAVA Group Inc. (CAVA) were still pending at the time of writing.

The current market volatility underscores the significant uncertainties facing investors in the wake of the recent election. The potential for significant policy shifts, coupled with the looming inflation report, creates a complex environment demanding careful navigation and a close watch on developments both domestically and internationally.