Small-cap stocks and Bitcoin rally as Trump secures US presidency

Small-cap stocks and Bitcoin-related shares are rallying sharply following Donald Trump’s win in the US presidential election, with investors anticipating policies that could benefit smaller companies and boost the crypto market.

The iShares Russell 2000 ETF (IWM), which tracks small-cap stocks, jumped 6% on Wednesday, marking one of its largest moves in recent years as investors speculated on a pro-business regulatory environment under the new administration.

Small-cap stocks soar on Trump’s pro-business agenda

The surge in small-cap stocks comes amid hopes for Trump’s tax and regulatory policies that are expected to favor small businesses.

Chris Senyek, a strategist at Wolfe Research, noted that the new administration may prioritize “extension of individual and pass-through tax cuts,” alongside deregulation measures that often fuel small business growth.

Additionally, Senyek predicts a robust fiscal package from the Republican Congress in the coming year, potentially helping to offset economic slowdowns and support smaller businesses.

The iShares Russell 2000 ETF recorded its fourth-largest opening gap on Wednesday, rising about 25% from its year-to-date low.

Analysts expect Trump’s domestic-focused policies, coupled with a supportive fiscal environment, to keep small-cap stocks strong in the coming months.

Increased merger and acquisition (M&A) activity, as well as an emphasis on American businesses, could also drive further gains in this sector.

Historical performance of small-cap stocks post-election

Historically, small-cap stocks have shown resilience following US elections, regardless of the party in power.

For example, small-cap stocks surged after both Trump’s election win in 2016 and Biden’s victory in 2020.

This trend of post-election gains highlights the sector’s adaptability and investor optimism about economic policies that often follow a new administration.

Several small-cap stocks saw especially strong gains on Wednesday, with CoreCivic and Geo Group both climbing over 20%.

Such companies are expected to benefit from a policy shift that favors domestic-focused businesses under Trump’s leadership.

Bitcoin stocks rally as crypto sentiment turns optimistic

In addition to small-cap stocks, Bitcoin-related shares are also up.

Companies like TeraWulf and Riot Platforms each gained over 10% on Wednesday as Bitcoin reached a record high following Trump’s election victory.

Investors and crypto advocates are optimistic about Trump’s stance on cryptocurrencies, anticipating regulatory changes that could further legitimize and support the crypto industry.

Michael Novogratz, CEO of Galaxy Investment Partners, expressed confidence in Trump’s potential impact on the crypto landscape.

“We’ve got a Congress that’s moving our way, a president that’s moving our way,” he told CNBC, adding that he expects Trump’s administration to be a “step change” for the industry.

Novogratz also believes that with regulatory support, including bank permissions to hold crypto on their balance sheets, the US could emerge as a global leader in the crypto market, bringing millions into the ecosystem.

Trump’s expected appointments to key positions, such as the Office of the Comptroller of the Currency, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation, could provide additional support for digital assets, further boosting investor sentiment in the sector.

The bullish sentiment around small-cap and Bitcoin stocks highlights investors’ belief in potential economic growth under a pro-business administration. As Trump’s presidency unfolds, investors are likely to keep a close watch on policy announcements related to tax cuts, deregulation, and crypto support, which could continue driving gains in both sectors.