The dust has settled over the election result and now president elect Trump is assembling his White House team. After all the predictions for how markets would react to a Republican clean sweep, some clear trends have already emerged, mostly running counter to expectations ahead of the election.

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Bond Selloff

 

One of the biggest and most important outcomes from the US election has been a sharp sell-off in government bonds. The yield on the US 2-year note climbed above 1% for the first time since January on Monday (November 14), while the 30-year topped 3%. The benchmark 10-yr was up at 2.27%, also the highest since the start of the year.

It’s not just the US – yields across Europe and the UK were also climbing in the week after the election. Italian 30-year yields hit their highest since July 2015. German 30-year bunds breached 1% for the first time in six months.

Behind the bond rout is the belief that President Trump will significantly boost infrastructure spending and deliver the kind of inflation-boosting stimulus that will make the Federal Reserve raise rates quicker. Investors are dumping bonds in favour of equities as they anticipate a sudden acceleration in inflation.

Stock sector to watch: Insurers have enjoyed healthy gains off the back of the Trump win. Rising yields means improved earnings for insurance companies. Legal & General rose over 7%, while Prudential has risen 10% since the election.

Dollar Rally

 

While bonds have been sold off, investors simply cannot get enough of the US dollar. DXY – the dollar index – has jumped to above the 100 handle, a sign that investors think interest rates are rising soon. USDJPY is somewhere between 107 and 108, its strongest in months, while EURUSD has sunk to its weakest level in a year.

Despite fears that Trump could destabilise markets and force a fairly hawkish Fed to hold rates where they are, markets now firmly expect the central bank to pull the trigger next month. There is a roughly 80% chance the Fed will hike at its next meeting, according to CME's FedWatch tool.

Industrial Metals

 

Some of the biggest gains have been seen in commodities, with vast infrastructure spending anticipated to boost demand for certain metals. Copper in particular is on a tear, notching up its biggest weekly gain in five years.

Stocks linked to the metal are also outperforming. Copper miner Antofagasta is the clear winner, gaining around 30% in the last week as its fortunes are tied directly to the price of the metal. December copper futures climbed for 14 straight sessions, the longest winning streak in over 30 years.

Equities

 

The Dow Jones industrial average tanked overnight as the results were coming in but somehow the reality of a President Trump looked a lot rosier for stocks than many feared. Cue a big rally and the Dow hitting an all-time high. European stocks are also higher.

But it’s not entirely a broad based rally for equities. We’re seeing some significant differences among sectors as they are affected by Trump’s win to varying degrees.

On the FTSE the big winners are Antofagasta +30% - copper miner; BAE Systems +10% - defence contractor; Ashtead +12% - construction; CRH +8% - construction; Glencore +15% - miner; Prudential +10% - insurer; Rio Tinto +10% - miner; Shire +10% - healthcare.

Gold

 

Gold was touted before the election as the key safe haven if Trump wins, but the trend since the election could not have been more different to the forecast. Gold has dropped to around the $1,222 handle, more than 10% below its recent peaks. Miners Fresnillo and Randgold have sunk 15% or more as a result, making them among the worst performers on the FTSE since the election.