Markets are reacting in expected ways to the US presidential results, but today's macro backdrop is "vastly different" from the Trump era between 2016 and 2017, Scotiabank Economics said in a note Wednesday.

Equity multiples and margins are higher now, which could limit gains. The economy is already dealing with excess demand and facing domestic policy-driven stimulus alongside supply shocks from population issues, investment drops, and trade tensions. This means inflation is back, Scotiabank Economics Vice-President Derek Holt said in the note.

"The fiscal position of the US government faces strong risk of spiraling out of control. Talk of replacing income taxes with tariffs is totally impractical. Loose talk of draconian spending cuts is also impractical partly given carve-outs of untouchable programs, such that deficits are likely to be under upward pressure from here," he said.

Stocks are broadly up, driven by hopes of lower taxes and deregulation, with S&P futures rising over 2%, TSX futures up about 0.5%, and European markets initially higher but now scaling back a bit. Asian markets will react later. US Treasury yields are spiking. Cryptocurrencies are rallying, including bitcoin hitting a new all-time high, the note said.

"All of this is a highly tentative market scenario to be informed by the policies that are actually pursued by the Trump administration, their timing, and whether it's a red sweep," Holt added.