With the conclusion of the U.S. presidential election, investors have responded with a surge in stocks, the dollar, and yields on U.S. Treasury bonds, showcasing a renewed sense of optimism. Here’s a breakdown of what’s been happening in the markets and what it could mean going forward.

Stock Market Surge Signals Investor Confidence

As election results clarified the path forward, U.S. stock futures jumped, bringing an end to weeks of market uncertainty. Futures for the S&P 500 climbed more than 2 percent, while the Russell 2000 index-tracking smaller U.S. companies-rose by an impressive 6 percent. Bank stocks joined the rally, benefiting from investor expectations of more favorable economic conditions.

Treasury Yields Rise Amid Stimulus and Deficit Expectations

U.S. government bond yields also saw an uptick as investors braced for possible policy changes. With the new administration expected to introduce expansive fiscal policies, particularly in areas like infrastructure and economic stimulus, traders have increased their expectations of both higher deficits and economic growth, potentially driving interest rates upward over time.

The Dollar Strengthens Against Key Global Currencies

In the wake of the election, the U.S. dollar appreciated against major currencies, including the Japanese yen, euro, Mexican peso, and Chinese yuan. The euro experienced one of its largest daily drops against the dollar in recent years-a move likely influenced by anticipated shifts in trade policies that could impact major trading partners.

Investors Positioned Early for a Potential Republican Victory

Interestingly, some of this market momentum began even before election day, with investors eyeing the potential for a Republican win and its implications for economic policy. This anticipation fueled gains in Treasury yields and helped the dollar climb against other currencies. Analysts believe that proposed changes in tax, trade, and immigration policies could be growth-supportive, with increased government spending as a possible catalyst.

The 10-Year Treasury Yield Climbs

As part of this post-election shift, the 10-year U.S. Treasury yield increased by about 0.2 percentage points, reaching over 4.4 percent-a significant move in the bond market. This rise reflects optimism for a more active economic environment. Meanwhile, shorter-term yields rose more modestly, as the Federal Reserve is expected to consider additional rate cuts, including one in its upcoming meeting on Thursday.