Wall Street votes Trump

Stocks hit all-time highs following early-morning news that former President Donald Trump is once again President-elect Donald Trump. US yields jumped and the dollar saw its best day since 2022 as investors cheered the Republican’s return to the presidency and the potential for what increasingly looks like his party’s control of both houses of Congress. The last time that happened, the GOP and Trump pushed through a multitrillion-dollar tax cut largely benefitting corporations and the rich. Trump has pledged to have Congress renew portions of the law, along with a whole host of other proposals. On Wednesday, the S&P 500 climbed 2.5% on bets the 78-year-old, the oldest incoming president in American history, will spend the next four years attempting to push through a slate of legislation sought by corporate America. The benchmark had its best post-Election Day in history, with a gauge of small caps rallying 5.8% while wagers on lower taxes and reduced regulation lifted banks.

Meanwhile, Wall Street’s “fear gauge” tumbled the most since August, and almost 19 billion shares changed hands on US exchanges, 63% above the daily average in the past three months. Even the Dow Jones Transportation Average jumped to a fresh high after a three-year drought of records. “The biggest takeaway from last night is that we received certainty that the market craves,” said Ryan Grabinski at Strategas. “This will allow both business and consumer confidence to improve. Attention now should shift to the Federal Reserve meeting tomorrow.” —David E. Rovella

That two-day Fed policy meeting now has a whole new flavor to it. Central bank officials are widely expected to lower their benchmark interest rate by a quarter percentage point on the heels of their half-point cut in September. They’ve projected one more quarter-point cut this year, in December, and an additional full point of reductions in 2025. But policymakers may now approach the question of when and how much to cut more cautiously as they assess how Trump’s economic proposals will potentially be turned into law.

The special counsel overseeing Trump’s federal criminal prosecutions is preparing to drop them before the president-elect is sworn in. Jack Smith is evaluating how to wind down the cases, one over Trump’s role in the Jan. 6, 2021, insurrection and efforts to overturn President Joe Biden’s election, and the other over Trump’s alleged mishandling of American military secrets. Trump still faces sentencing for his conviction in New York state court for attempting to illegally manipulate the 2016 presidential campaign, and a Georgia racketeering prosecution of Trump tied to his effort to overturn the 2020 vote is on hold.

Trump, now on his way back to the White House after defeating Vice President Kamala Harris, crashed through many informal guardrails governing US political life during his first term. This time, he’ll be operating with even fewer restraints. In less than 11 weeks, Trump will take the oath of office on the same Capitol steps where his followers attacked police in a failed attempt to keep him in power. During the 2024 campaign, Trump has repeatedly promised to set aside the Constitution in pursuit of his political enemies and illegal immigrants alike. So, how far will he actually go?

The transactional nature of his first presidency showed how Trump ranked foreign leaders based on their perceived strengths and weaknesses—and his personal taste. How everyone fits into his orbit this time will come down to how many ingratiate themselves, and what kind of relationships they already had. Trump’s return will likely be a boost for India’s Narendra Modi, who’s faced scrutiny for his Hindu nationalist policies at home and allegations of extrajudicial killings abroad. Saudi Arabia’s Mohammed bin Salman (no stranger to allegations of extrajudicial killings abroad) will likely seek out deals without the finger wagging he had to endure under other US administrations. Israel’s Benjamin Netanyahu will likely celebrate a fellow political survivor. Here is a look at who will be pegged as a friend or foe in Trump world.

Trump’s main 2016 campaign bogeyman was China, and while he fit a few more in this time around, the world’s second-largest economy was certainly still front-and-center in 2024. Back when Trump first started his trade war with China six years ago, President Xi Jinping found himself on the back foot, unsure how to respond. Trump now has threatened to put new tariffs of as much as 60% on Chinese goods, a level Bloomberg Economics says will decimate trade between the two countries. This time, however, China may be better prepared for a fight.

German Chancellor Olaf Scholz called for a snap election after his fractious, three-way coalition finally collapsed over how to pull the European giant out of its deep economic slump. The political crisis came to a head after Scholz dismissed his finance minister, Christian Lindner, saying that the chairman of the pro-business FDP party had refused a proposal to suspend rules limiting new borrowing to help plug a shortfall in next year’s budget.