The Initial Impact of the 2024 U.S. Election on Securities Lending
January 29, 2025
With two months now elapsed since the 2024 U.S. presidential election, policy shifts planned by the incoming administration have begun to come into focus, and broader financial markets have reacted in kind. While the implications of a potentially dramatic shift are only beginning to be realized, there are key signals and themes which can already be observed within the securities finance market.
Election Results Supercharge Bitcoin
Perhaps the biggest winners of the post-election “honeymoon” phase were investors in cryptocurrency. With the incoming administration being viewed as largely bullish on crypto, Bitcoin surged to an all-time high, peaking at a value over $100,000. President-elect Trump is reportedly considering creating a “strategic reserve” of the currency, a purchase that would mark a watershed vote of confidence in the crypto industry.
The Bitcoin rally spilled over into equity markets with firms engaged in Bitcoin infrastructure or with large holdings of the currency acting as a popular proxy investment. One such firm was MicroStrategy (MSTR US), the largest corporate holder of Bitcoin. In the weeks following the election, the firm’s stock price more than doubled with the value of their Bitcoin holdings exceeding $40 billion. The lending market responded with a 26% decline in the shares on-loan for MSTR in the 10-day period following the election, an indication that short sellers’ interest was waning.
However, with its share price tied so closely to a potentially volatile asset, MSTR has seen a rebound in short interest with a 49% increase in shares on loan over the final two weeks of 2024.
Shorts Cool on DJT
It’s not difficult to argue that the security with the most direct ties to president-elect Trump’s victory at the polls is the stock that bears his name. Shares of Trump Media and Technology (DJT) were an active hard-to-borrow throughout 2024, generating the fifth most revenue of any single security for lenders. A combination of tight lendable supply, as a large portion of DJT is not institutionally held, and uncertainty about how Trump would fare in the election generated significant fees for DJT.
As Trump secured his political future with a victory in November, DJT has seen a relative cooling in securities finance market. In the month leading up to the election, DJT averaged a 93% utilization rate with average spot fees above 1,000 basis points.
As of this writing, DJT had cooled to a 77% utilization rate with a more pedestrian spot rate of 139 basis points.
Treasurys in the Spotlight as Fiscal Policy Looks Set to Change
Fiscal policy will of course be front and center for the new administration, with one of Trump’s marquee campaign promises being aggressive and wide-ranging tariffs on foreign goods. The threat of tariffs poses a question mark in the efforts to tame inflation that ran rampant in 2023 and early 2024. Fed chair Jerome Powell, a Trump appointee, has previously faced public criticism from the president-elect, creating further uncertainty around monetary decision making and contributing to increased Treasury yields following the election.
In the lending market, Treasurys saw an uptick in activity with the November 20-year bond (US912810UF39) representing the third-highest revenue-generating security for lenders in the month of December.
The bond saw steadily increasing demand rising from $1.3 billion in bonds borrowed at the start of the month to over $5 billion borrowed by December 30. The U.S. November 10-year bond (US91282CLW90) also saw a similar increase in demand, rising from $3.8 billion on loan at the start of December to over $11.4 billion on loan today.
Tesla Booms as Musk Features Prominently in Trump Transition
Tesla CEO Elon Musk has featured early and often as part of Trump’s transition team, with the president-elect announcing a new presidential advisory committee, The Department of Government Efficiency, to be co-chaired by Musk.
In parallel, Tesla (TSLA) stock has boomed, rising more than 50% since election day. In the lending market, limited borrowing activity has cooled even further as shorts likely don’t see value in betting against the world’s most valuable automaker with such close ties to the White House. Tesla, which was the top revenue-generating security of 2018, battled headwinds in early 2024 when it reported a 9% decline in Q1 revenue and slashed jobs to cut costs. Since the election, utilization rates for Tesla stock have fallen to a near all-time low, averaging just 1.15% since November 5.