As a new week begins market narratives remain fixated on the resounding election victory for Republicans. Bullish sentiment continued following the election as investors digested prospects for the opening act of a second Trump administration.

The S&P 500 rose by 3.7% across the three trading days while small cap stocks showed signs of life with the Russell 3000 trading near a record high. On Monday, the S&P was adding another 0.23% in morning trading.

In the near term, investors are factoring plans to deploy resources to the southern border immediately and hit Chinese imports with a tariff as high as 10% above the levies implemented in 2018.

Meanwhile, longer-term sentiment has been boosted by plans for rapid deregulation for both the financial sector and fossil-fuel production. How rapid and impactful these and other policy changes could be remains an open question. 

Critically, a spike in bond yield over fears of inflation caused by Trump policies appears to be offset by anticipation for monetary policy actions that could cushion the blow. The Federal Reserve decision on Thursday to lower benchmark rates by a quarter of a percent will be followed by an anticipated expansion of liquidity in the Treasury’s general account in the new year. 

For foreign stock markets, particularly those in Europe, the change in the direction of U.S. trade is expected to have a huge impact. In a note to clients last week the European equity strategy team at UBS in London laid out the case that a ‘Trump-constrained’ scenario will see European equities still provide positive returns but less than U.S. markets.

In a ‘Trump-unconstrained’ environment, where a GOP Congress rubber stamps aggressive action, the bank expects European markets to underperform the U.S. by a large factor through 2026.

Robert Savage, head market strategist for Bank of New York summed up the mood among allocators in a message to clients over the weekend.

“Trump and his first 100 days will be critical given the U.S. midterms in two years likely take away any Republican control of Congress,” adding that “all of this leaves investors rethinking Trump trades from higher curves to a stronger U.S. dollar to M&A and SME investing with domestic focus.”

Impact stories we’re tracking at Equities

Hedge funds score with clean energy shorts

In a report issued to investors on Monday, Goldman Sachs noted hedge fund bets against renewable electricity producers increased last week. The Financial Times estimates that the total windfall reaped by short sellers betting against clean-energy stocks may exceed $1.2 billion.

Among the biggest losers were Plug Power PLUG , a hydrogen producer that retreated 22% following the election, and solar company Sunrun RUN , whose stock sold off by 30%. Early signals on Monday suggest that green-energy bulls are buying into the selling with the Invesco Solar ETF TAN up modestly in tandem with a sharp rebound for Sunrun of over 3.5%. 

Following political developments world leaders skip environmental summit

The number of world leaders expected to be in attendance for COP29 in Baku, Azerbaijan, continues to decline. Last week embattled German Chancellor Olaf Scholz announced that he would not be attending the conference while  French President Emmanuel Macron and European Commission President Ursula von der Leyen were also skipping the event.

Subsequently Beijing, Washington and Brazil announced that their respective leaders — President Biden, Premier Xi and President Lula da Silva — will also not be in attendance.  IMF chief Kristalina Georgieva will also not be traveling to Azerbaijan. Leaders in Papua New Guinea announced that the island nation will not be sending any representatives with the foreign minister referring to the event as a “total waste of time” in subsequent comments.

Read more: Republican wins could spell the end of Biden-era renewable energy investments