- The US dollar index rocketed higher, gaining as much as 1.89 early Wednesday morning.
- US stock index futures were showing strong gains across the board.
- The commodity complex was generally in the red, with soybeans taking a hard hit.
The US had two paths in front of it heading into Tuesday’s presidential election, and as it looks at this hour is the choice was made for a second Donald Trump administration. This is interesting for a number of reasons, and I’ll refrain from making a political comment at this time and in this space, but from a market point of view it brings to an end the string of correct calls made by the S&P 500 ($INX). As I discussed last time, research had shown a higher 3-month close by the S&P from the end of July through the end of October projected the party in the Oval Office would stay in office, with a lower three-month close favoring the opposing party. This year, the S&P finished October at 5,704.45, up 183.15 from July, yet here we are.
A look at the quote screen early Wednesday morning shows markets reacting to the election results, and the likely ripple effects that will be felt around the world. You’ll notice the Barchart Futures Market Heat Map is showing one market sector in the green – Indices (US stock index futures). The December S&P futures contract jumped as much as 117.50 points (2.0%), posting an initial high of 5,929.75. If this enthusiasm holds through the open of the actual index at 9:30 (ET) Wednesday morning it would mean the S&P should post a new all-time high, immediately casting a shadow of doubt on the bearish spike reversal completed at the end of October. Recall from my previous piece when I talked about how the long-term trend had turned down, from a technical point of view.
The US dollar index ($DXY) also rallied, gaining as much as 1.89 through early Wednesday morning. This one is more of a puzzler because the president elect is on record saying he wants a weak dollar and negative interest rates. This type of rhetoric would theoretically strengthen US stock indexes, which is what we are seeing initially, but weaken the greenback. We’ll see what happens as the hours pass. Additionally, the promises of more tariffs and trade wars are expected to reinvigorate US inflation problems, similar to the seeds that were sown the last time this series of events took place. Along that same line, US Treasury futures were taking a beating as yields rocketed higher. As of this writing, US 30-year T-bonds (ZBZ24) were down 1.5% with 10-year T-notes down 0.6% (ZNZ24).
As for the rest of the commodity complex, we see December gold (GCZ24) showing an early loss of as much as $39.90 (1.5%), most likely a reaction to the strong rally in US stock index futures. As for overseas markets, European stock indexes are higher for the most part while Asian stocks were mixed. Elsewhere in the Metals sector we see industrial metals getting hammered with copper down 9.4 cents (2.1%) and silver off 40 cents (1.2%). Again, this seems to be a knee-jerk reaction to concerns over a slowdown in economic growth usually associated with isolationism, but it’s still early and markets have a way of sorting things out over time.
The spot-month WTI crude oil contract (CLZ24) lost as much as $1.76 (2.5%) but has rallied off its initial low. Pressure in crude oil, and the Energies sector as a whole, isn’t overly surprising as a second Trump administration is expected to be as friendly to members of OPEC+ as the first round was. This opens the door to possible production increases from OPEC members, and a potential reduction in US production. Recall the US has become the world’s largest crude oil producers the past few years in reaction to events around the globe.
The Grains sector was lower across the board, with soybeans being hit the hardest. Here we see the January issue (ZSF25) fell as much as 19.75 cents (2.0%) before stabilizing a bit. The logic is simple: The US will likely turn more global business over to Brazil due to increased trade wars and tariffs with the world’s largest soybean buyer (China). This while projections are for Brazilian grain production to double over the next 11 years. Will the US be able to create enough domestic demand to chew through its supply of soybeans? Time will tell.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
