U.S. stock markets have surged higher in response to the early results of the U.S. presidential election. According to Citi’s analysis, early “election results have at least taken a Democratic victory off the table as Republicans appear likely to capture a majority in the Senate.”
With a Republican majority in the Senate looking likely and President Trump in control of the Electoral College based on current projections (as of 11:05 AM ET), the and futures both rose 1.1%, while trading up more than 2% knew. In addition, the interest rate on ten-year government bonds has risen to 4.4%.
“While Trump has a notable lead in electoral college votes (where calls have been made), there are still several key swing states in play,” Citi equity strategists led by Scott Chronert said in a note.
While the quarter has seen little change so far, a Trump win combined with a Republican victory could lead to further positive market momentum, they said.
“US stocks are reacting to the reported election results towards another Trump term. Trends are pointing towards a red line, although it is still too early to make that call.”
Despite the early optimism, Citi said several factors, including the Levkovich index’s recent move into the euphoria zone and the S&P 500’s valuation at 24 times annual earnings, indicate the stock market is fairly or fully valued.
Moreover, there is a feeling that a soft landing is already reflected in current valuations, and that investors may be prematurely taking into account the earnings growth expected in 2025.
Concerns also remain about the potential impact of Trump’s tariff policies on future growth expectations and profit margins, despite potential tax breaks.
Conversely, if the election results were to shift significantly in favor of Vice President Harris overnight, a pullback from current futures prices is expected.
“We would be inclined to buy into a meaningful pullback,” Chronert added.
