Trump’s Defeat Fuels Economic Surge in Chile: Stocks Jump 2.52% and Dollar Plummets Following Democratic Victory

Original article: La derrota de Trump se cotiza al alza en Chile: bolsa salta 2,52% y dólar se desploma tras triunfo demócrata

The ramifications of Donald Trump and the Republican Party’s defeat in the U.S. midterm elections have rippled through the Chilean economy: the Santiago Stock Exchange saw a significant 2.52% surge, while the dollar tumbled.

International investors reacted to the political shift in Washington poised to emerge from the November 3 electoral process, where the Democratic Party solidified the so-called «blue wave». This victory not only cemented its control over the House of Representatives but also shaped a majority in the Senate by capturing historically conservative areas such as Texas, Kansas, and South Carolina.

For the Trump administration, with less than two years remaining in its second presidential term, the election results represent not only a severe setback but also a full-blown political reckoning. U.S. citizens expressed their discontent through the ballot amid rising living costs, the prolonged military conflict with Iran, and the controversial governance of the far-right president.

The new composition of Congress in the U.S. has altered the financial forecasts of international agents, as an opposition-led legislature will impose limits on the administration’s agenda. This power shift will hinder the Executive’s ability to implement substantial tax cuts and advance a new fiscal expansion program.

In light of this situation, Felipe Barragán, investment strategist for Pepperstone, noted in an analysis for El Mostrador that this new balance of power within the U.S. Congress will reduce pressures on public spending and moderate the requirements for issuing new sovereign debt.

According to the specialist’s perspective, the initial enthusiasm observed in equities does not reflect a structural transformation in American economic growth in the short term but rather a recalibration of expectations regarding the economic policies the White House will pursue.

«The market’s initial reaction is more about a reassessment of expectations on new economic policies than an immediate change in the foundational growth drivers of the U.S.,» he stated.

Santiago Stock Exchange Jumps 2.52%

In local stock market trends, the IPSA index, the main indicator of the Santiago Stock Exchange, closed the session at 10,627.08 points, successfully breaking the barrier of 10,600 units and the technical ceiling of 10,620 points that market agents had been closely monitoring.

The best-performing stocks were led by Embonor-A, which jumped 9.02%, followed closely by the airline Latam Airlines, whose shares rose 7.7% due to significant reductions in operational fuel costs.

Other companies that reported substantial gains during the trading session included the mining company SQM-B with 5.45%, tech firm Sonda with 3.85%, and retail company Falabella with a 3% increase.

The performance of the Chilean foreign exchange market also showed a positive trend, marked by a strong drop of $16.2 in the U.S. dollar, now priced at $965.9, representing its lowest valuation since late September and placing the Chilean peso among emerging currencies, as reported by El Mostrador.

This global weakening of the American currency was mainly due to adjustments in budget projections and contractions observed in Treasury bond yields, as explained by a representative from Pepperstone.

Concurrently, the national currency found solid support from commodity performance, particularly highlighted by copper prices—hovering around US$6.44 per pound—and a confirmation of increased foreign currency supply reported by the Ministry of Finance for the current month.

Additional factors included the plunge of Brent crude oil, which fell 8.67% to $94.62 per barrel, in anticipation of potential easing in U.S. hostilities against Iran.

The dynamism recorded in Santiago mirrored the positive trend observed in the New York Stock Exchange, where the Dow Jones rose 3%, supported by increases of 1.6% in the S&P 500 and 1.4% in the Nasdaq index.

Democratic Victory Doesn’t Guarantee Bull Market

Despite the uptick, various financial analysts caution that the Democratic victory in the midterm elections does not automatically ensure a continuous or prolonged bull market.

In this regard, Barragán emphasized that investors should cautiously assess whether this initial surge marks the start of a sustained stability or merely represents a tactical adjustment or «a tactical reversal of positions,» as he stated in a mentioned source.

Ultimately, the analyst warned that the progress of the local economy will continue to depend on fluctuations in the red metal, fuel behavior, and inflation control. Regarding global scenarios, he suggested that the behavior of international risks will hinge on the upcoming economic measures implemented in the United States.