TRUUUUUUMP!!! Buy it all, goddammit. Except the bonds. Sell those.

I realize Wednesday’s a somber day for a lot of you, and for a lot of Americans in general. “We’re goin’ back” and a lot of you are upset about that. I’m sympathetic. God knows I am. I think Americans have just made a terrible, and potentially perilous decision, and just as importantly, squandered yet another opportunity to forge a path towards a “more perfect union.”

That said, you can’t hedge against, or otherwise trade, the demise of American democracy any more than you can hedge a North Korean nuclear strike on Seoul, a Yellowstone eruption or Chicxulub Impactor Part Deux. Colloquially: If he’s a dictator — or, more to the point, if the GOP’s prepared to let him be a dictator — then we’re f–ked. Full stop. Downside in equities or long vol positions ain’t gonna help you if that’s where we’re going. America had a chance to arrest Trump just after January 6, 2021, and the country didn’t do it. Americans had a chance to reject Trump on Tuesday, and instead they voted resoundingly to reelect him. So, here we go. Strap in.

Wall Street had a field day, and every faux-rich red state Trumper was elated. One of my old real estate agents (in South Carolina), texted me first thing in the morning, high as hell on caffeine and covfefe: “Whatever you think about HIM, the DOW is up 1,000 points!” I texted her back: “!!!!!” She tapped back with a smirk emoji. She knows I don’t do texts. Or exclamation points.

Stocks soared. The two-day gain for the S&P was on track to be the largest in years.

The S&P’s fresh record was the benchmark’s 48th of 2024.

“With the current optics looking outright ‘red sweep,’ you’re getting the well-socialized scenario with the largest US risk-on impulse, as the usual tropes about the ‘run hot’ Trump / GOP policy mix of tax cuts and sweeping deregulation hypothetically then have a mandate and broad sponsorship into ‘law of the land,'” Nomura’s Charlie McElligott wrote Wednesday.

As you might expect, the dollar was very firm, where that means various gauges of greenback strength had their best one-day showings in living memory.

The figure above is just the widely-cited DXY gauge. It was up almost 2% at the highs, a huge move.

Remember: Not all of that dollar strength — indeed, probably not even most of it — is attributable to “pure” growth expectations. Rather, FX is responding to imminent tariff escalations, higher US yields, a likely shallower Fed cutting path and, relatedly, the prospect of higher “baseline” inflation. (Trump says his policies won’t cause inflation which… you know, whatever? Maybe he’s right. Who knows. Nobody. He’s a legendary moron, but economists are famous for being wrong, and economics isn’t a hard science. Who you gonna believe? “We’ll see what happens,” as Trump would say.)

US yields were obviously up a lot. The long bond took things especially hard, selling off to the tune of nearly 20bps.

That speaks to what, if the GOP does in fact hold the House, will at some point be a difficult “discussion” between the bond market and Trump: The bond vigilantes are a bunch that’s hard to placate in the presence of fiscal profligacy. You can keep them at bay, but you need a central bank willing to gun down the barbarians at the gate.

To be sure, Wednesday’s bond rout was to be expected given the election outcome. It was pronounced, but not necessarily disorderly or escalatory. The follow-through — i.e., whether it extends beyond one session and if it does, what character it takes on, etc. — will be a key determinant in the outlook for a risk rally that’s running on “vibes.” Remember: Rampant dollar strength isn’t generally conducive to buoyant risk assets.

As McElligott put it, “the reversal risk for everything — from the stock market to the economy — in the ‘red sweep,’ run-hot policy-mix scenario has always been about ‘too much’ selloff and term-premium rebuild in long-end rates and a ‘shocked’-higher US dollar, which then risks a financial conditions tightening impulse that can drag on the economy in the months ahead,” he wrote.