US stock markets hit record highs on Wall Street, and the dollar posted its biggest increase in eight years following Donald Trump’s historic re-election victory. Bitcoin also surged to an all-time high, driven by Trump’s promise to focus on the volatile cryptocurrency.

Despite the market optimism, investors are cautious that Trump’s proposed tax cuts and tariff hikes could lead to higher inflation and slow down the pace of interest rate reductions.

Higher interest rates for a prolonged period mean that investors will likely see better returns on investments held in dollars.

Market Reactions to the Election

Following the election results, markets and currencies experienced significant movements:

• Major US stock indexes surged, with banks performing particularly well.
• The dollar strengthened by about 1.65% against various currencies, including the pound, euro, and Japanese yen.
• The pound dropped 1.16% against the dollar, reaching its lowest level since August.
• The FTSE 100 index, representing the largest companies in the UK, saw a slight increase in early trading but closed marginally lower.
• The euro fell 1.89% against the dollar, hitting its lowest point since June. European stock indexes like Germany’s Dax and France’s CAC 40 closed down by 1.14% and 0.51%, respectively.
• In Japan, the Nikkei 225 index ended the day up 2.6%, while China’s Shanghai Composite Index dipped 0.1%, and Hong Kong’s Hang Seng dropped by around 2.23%.

Bitcoin’s Meteoric Rise

Bitcoin’s value surged by more than $6,600, reaching an all-time high of $75,999.04. This jump is linked to Trump’s pro-crypto stance, which contrasts with the Biden administration’s crackdown on cryptocurrency firms.

During the election campaign, Trump promised to make the US the “bitcoin superpower of the world” and suggested he might fire Gary Gensler, the chair of the Securities and Exchange Commission, who has taken legal action against several crypto firms.

Trump also indicated plans to appoint billionaire Elon Musk to oversee an audit of government spending. Musk, a long-time supporter of cryptocurrencies, had Tesla invest $1.5 billion in Bitcoin in 2021. Tesla’s stock rose more than 14% on Wednesday, reaching a two-year high.

Economic Outlook and Trade Concerns

Experts noted that the financial markets showed signs of volatility, responding to global uncertainty and Trump’s potential economic policies. US bond yields, which reflect the return on government debt, surged, indicating that investors may anticipate increased borrowing under the new administration.

Economists have expressed concerns that Trump’s trade policies, especially his plans to raise tariffs, could negatively impact global economies, including those of the eurozone and the UK. UK Chancellor Rachel Reeves emphasized the importance of free and open trade and said that the UK would make “strong representations” to Trump about maintaining such trade agreements.

Trump has stated that he would significantly increase trade tariffs, particularly on China, if he were to return to office. Ahmet Kaya, a principal economist for the National Institute of Economic and Social Research (NIESR), warned that the UK could be heavily impacted by these plans, with economic growth potentially slowing to 0.4% in 2025, down from a previous forecast of 1.2%.

Trump’s protectionist stance has also raised concerns in Asia, where his proposed tariffs on US imports could cause significant disruption.

Additionally, Trump’s foreign policy views, particularly regarding his approach to Taiwan’s security amid tensions with China, have left investors uncertain. Taiwan plays a crucial role in global technology production, particularly in semiconductor manufacturing, which is vital to the global economy.

As Trump’s administration prepares to take office, investors will have to keep an eye on several crucial economic and geopolitical issues.