Biggest Trump Election Winners: Is the Rally Sustainable?

Tesla, in particular, has been a focal point for investors, as Elon Musk—a vocal Trump supporter—stands to benefit from the new administration.

Over the past week, Tesla shares have climbed by more than 15%, and the stock is up over 40% in the last month. Since November 4th, Tesla shares have surged more than 30%, pushing the company’s market value back above the $1 trillion mark for the first time since 2022 and significantly boosting Musk’s wealth.

This rally is further fueled by a short squeeze, which has forced hedge funds to buy Tesla shares to cover losses from short positions against the stock. Additionally, under the Trump administration, Musk may benefit from potentially favourable regulatory moves, particularly in the autonomous vehicle sector where Tesla is heavily invested.

Notably, Trump has announced that Elon Musk, alongside Vivek Ramaswamy, will lead a newly created “Department of Government Efficiency,” an initiative aimed at reducing government spending. Tesla isn’t the only asset riding the wave of Trump’s re-election; other stocks, sectors and instruments are similarly benefiting, and we will delve into those next.

Tesla Isn’t the Only Winner of Trump’s Election

The U.S. election results have had a sweeping impact across various asset classes, with numerous financial sectors experiencing significant gains as investors anticipate shifts in regulatory and economic policies under a Trump administration. Notably, the recent rally in Bitcoin and Dogecoin, a surge in private prison stocks, and strong performances in the USD and the U.S. financial institutions all hint at a potentially profitable climate for certain assets.

Bitcoin and Dogecoin Rally on Regulatory Optimism

Bitcoin

Bitcoin recently reached an all-time high of $90,000 (up more than 30% since the election), driven by the expectation of more crypto-friendly regulations under Trump’s administration. Many traders believe that the upcoming U.S. leadership will foster a regulatory environment that encourages growth and adoption of digital assets among different types of investors, including institutional and professional investors.

Trump’s involvement in the crypto world, particularly through his decentralised project World Liberty Financial, has further fueled speculation about his administration’s stance on digital assets. Traders interpret Trump’s apparent openness to cryptocurrency as a favourable signal for the industry, with the expectation that his administration may promote policies supportive of innovation and expansion in this space.

Dogecoin

Dogecoin has also been a standout performer in the post-election crypto rally, far outpacing Bitcoin’s gains. Since the election, Dogecoin has soared over 150%, in part due to a coincidental connection with Trump’s announcement of the new “Department of Government Efficiency” (referred to as “DOGE”).

The appointment of prominent crypto advocates Elon Musk and Vivek Ramaswamy to lead the department only reinforced the public’s enthusiasm for Dogecoin, pushing its price up 20% in a single day. Investors are viewing this as a symbolic nod toward broader acceptance of crypto and see potential for further growth in meme-based digital assets.

Private Prison Operators Poised for Growth

Private Prison Stocks

Shares of major private prison operators, including GEO Group and CoreCivic, have surged more than 70% since November 4. This growth reflects investor expectations that Trump’s promises around immigration enforcement will translate into favourable policies for the private prison industry.

In contrast to Biden’s 2021 directive to end federal contracts with private prison companies, Trump’s stance indicates a possible resurgence in demand for private detention services. Trump’s appointment of Tom Homan as the new “border czar” further bolsters investor confidence, as Homan is known for his strict approach to immigration enforcement.

With ICE’s long standing reliance on private facilities to house detainees, industry experts predict substantial growth in the private prison sector. John Sandweg, former director of ICE, indicated that the Trump administration could grant “massive contracts” to private prison firms. During Trump’s previous term, private detention facility usage hit a record high, according to a 2019 report—a trend likely to persist as his administration adopts a stricter immigration policy.

U.S. Financial Institutions and the Strong Dollar

Bank Stocks

Shares in America’s largest financial institutions have also rallied as investors bet that banking and finance companies will benefit directly from Trump’s push for deregulation. Trump’s previous tenure saw a loosening of financial oversight, and his current promises of reduced regulation have sparked renewed investor interest in the sector.

As investors believe that Trump’s policies are potentially going to support growth and to impose higher tariffs, which might push inflation higher, the US central bank is likely to keep rates higher for an extended period. In that scenario, banks are positioned to capitalise on greater interest rate spreads, as they can earn more on interest income. This environment tends to improve banks’ profitability, making them more attractive investments in a climate of rising rates and lighter oversight.

U.S. Dollar Strength

Earlier this week, the U.S. dollar reached a 6.5-month high against major currencies, climbing above 106, while the euro fell to $1.0596 on Tuesday, its lowest level since November 2023.

This dollar strength is partly driven by market expectations that U.S. interest rates will remain elevated for an extended period, making U.S. Treasury bonds increasingly appealing to global investors seeking higher yields. As demand for these bonds rises, so does their price, which in turn boosts the dollar’s value.

Furthermore, the prospect of strong returns in U.S. assets, including stocks and bonds, can attract more foreign investment. To access these U.S. markets, international investors need to convert their local currencies into U.S. dollars, further increasing demand for the dollar and contributing to its recent gains.

Bottom Line

In conclusion, while the Trump re-election rally has generated impressive gains across various asset classes, the sustainability of this momentum remains uncertain.

The future of these trends will largely depend on the administration’s ability to enact the anticipated policies. Investors are eyeing potential regulatory shifts favoring sectors like technology, finance, and cryptocurrency, while private prison stocks and the strong dollar also reflect market expectations tied to Trump’s policy approach.

However, the implementation of these initiatives, and any resulting economic impact, is still far from guaranteed. As with any politically charged market reaction, caution is advised, as fluctuations could arise depending on policy delays, geopolitical factors, or changes in Trump’s stance on key issues.

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