As the U.S. presidential race heats up, markets are reacting strongly to the evolving election results, and one asset is seeing a major boost: Bitcoin. On Tuesday, U.S. stock futures surged, with the Dow Jones Industrial Average rising by 1.3%, the S&P 500 climbing 1.3%, and the Nasdaq increasing by 1.4%. At the same time, Bitcoin spiked by 7.5%, briefly touching the $75,000 mark. This surge is linked to the so-called "Trump trade," a market reaction that has been closely tied to the Republican candidate's political prospects.

As the election results started to come in, states that reliably lean Republican and Democratic were quickly claimed by Donald Trump and Kamala Harris. However, the key moment for investors came when North Carolina, a major swing state, was called for Trump. Predictions of a Trump victory reached over 90%, driving markets to react. Alongside Bitcoin’s surge, the U.S. Dollar Index rose by 1.3%, and the yield on the 10-year Treasury bond jumped 14 basis points to 4.43%.

The "Trump trade" refers to the market’s response to expectations that Trump's policies—such as his tax cuts, tariffs, and stance on immigration—are seen as inflationary. These policies are expected to limit the Federal Reserve's ability to lower interest rates further, which drives investors towards assets like Bitcoin, which is seen as a hedge against inflation. Additionally, Trump has positioned himself as a supporter of the cryptocurrency sector, further boosting investor sentiment in Bitcoin.

The surge in Bitcoin and other assets linked to Trump’s policies highlights a key aspect of the current political environment. Trump’s economic platform, which includes tax cuts and deregulation, particularly benefits industries such as oil and gas, cryptocurrency, and financial services. Stocks related to these sectors, such as those of crypto platforms like Coinbase, have also seen increases.

Meanwhile, stocks of Trump Media and Technology, despite volatile trading during regular hours, soared 10% in after-hours trading, further indicating the market’s reaction to Trump’s growing political momentum.

While the U.S. markets have been experiencing optimism, international markets have been cautiously eyeing the results. The potential impact of a Trump presidency on global trade, especially his hard stance on tariffs, remains a concern. Trump has vowed to increase tariffs across the board, with a focus on China, and even threatened to impose a 25% tariff on imports from Mexico if it fails to secure its border with the U.S.

In Asia, the Shanghai Composite Index rose by 0.2%, and Japan’s Nikkei 225 saw a significant 2.5% increase, fueled by a weaker yen, which makes Japanese exports more competitive. Meanwhile, European markets showed modest gains, with the Stoxx 50 rising by 0.4% and the Stoxx Europe 600 increasing slightly.

One critical element that will shape both the U.S. and global economic outlook is the federal debt, which is expected to grow under either Trump or Harris. Both candidates have policies that are projected to increase the deficit, but Trump’s plans, including tax cuts and increased military spending, could lead to a deeper fiscal hole. Financial markets are already reacting to these concerns, with bond investors beginning to question the sustainability of the federal deficit.

As the U.S. Treasury prepares to auction off more debt, bond investors, or what financial analysts call "bond vigilantes," may start selling off bonds to protest the rising deficit, which could push interest rates higher. This, in turn, would increase borrowing costs for businesses and consumers alike, including for mortgages and other loans.

In summary, as election results unfold and markets react, the surge in Bitcoin and other financial assets linked to the Trump trade is a reflection of investor sentiment about the potential impact of a Trump administration on the economy. While Bitcoin reaches new highs, the broader implications of U.S. fiscal policy and trade could reverberate globally, shaping both the financial markets and the future economic landscape.

FORTUNE.COM