As the US election results trickle in, one thing is starting to become clear, Donald Trump is overperforming compared to 2020 by 3%, and he is performing better than expected in key Republican states. In contrast, Kamala Harris is underperforming Biden in 2020.
Donald Trump is surging ahead in the electoral college votes, at the time of writing he has 230 electoral college votes compared to 182 for Harris. Trump has just won North Carolina, a key swing state. Although it’s too early to call, Trump is also holding a healthy lead vs. Harris in other key swing state races. The Georgia secretary of state has come out and said that Donald Trump has an insurmountable lead with the number of votes left to count, so we expect this other critical swing state to turn red later today. He is also expected to win 3 out of 5 of the electoral votes in Nebraska.
The early signs are that Trump also holds healthy leads and may win Pennsylvania, Michigan, Wisconsin and Arizona, albeit by slim margins.
Is there any way for Harris to come back? If Trump wins Georgia, this will become almost impossible for Harris. She now has to hold all of the Blue wall to secure a victory.
Republicans also ahead in Congressional race
There is also a growing chance that the Republicans will win a clean sweep at this election. Currently, there is a good chance that they will take control of the Senate. Republicans have already picked up 4 seats from the Democrats. Pollster 270towin.com, currently have the Democrats with 42 seats, with the Republicans on 51. The House vote is also tipping in the Republican’s favour, although it is still early in the count.
Financial markets re-position for Trump victory
The financial markets are acting like this is a done deal for Trump and Harris is out of the race. The dollar is making a strong comeback after falling earlier this week, and GBP/USD has slipped below $1.29. EUR/USD is also below $1.08. US bonds are falling sharply and US Treasury yields are surging. Bitcoin has made a new record high at $75,000, and just like in 2016, US stock index futures are surging as it starts to look like Trump has a clear path to victory.
US Treasury yields are having a very strong reaction to the US election results, the 10-year US Treasury yield is higher by 11 basis points, the 2-year yield is up by 7 basis points. This suggests that bond investors are putting the election result, and the economic consequences of a Trump victory, ahead of the Federal Reserve, even though the Fed is expected to cut interest rates this week and embark on a rate cutting cycle for the next year.
A Trump victory and a clean sweep for the Republicans in Congress may guarantee a surge in the size of the US deficit. The Fed Funds Futures market is starting to price this in. The implied US interest rate for December 2025 has risen from 3.65% on Tuesday to 3.73% on Wednesday morning. Interestingly, gold is mostly unchanged as the results trickly in, however, that could be a reaction to a stronger dollar.
Predictit, is now pricing in a 95% chance of victory for Donald Trump. The market-based polls for the election appear to have been more accurate than the national polls, and they have been consistent in expecting a Trump victory.
There are still many states left to officially declare the winner of this election, and we do not know the final results. However, the financial markets are undoubtedly positioning for a Trump win.
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