The red wave that swept President-elect Trump to a second term also resulted in substantial gains for American investors. On Friday, the Dow Jones Industrial Average and S&P 500 hit record highs, rising 4.7% and 4.6% respectively, represent the best week of 2024. The Nasdaq Composite saw its 31st record close, climbing 5.7% for the week.
CFRA Chief Investment Strategist Sam Stovall observed, “Contrary to popular belief, gridlock under a Republican president is undesirable. The best market returns since World War II have occurred when a Republican president faced a Republican-controlled Congress,” which historically averages a 13% annual market increase with gains 75% of the time. Currently, Republicans control the Senate and lead in House races.
Stovall also noted that small-cap stocks, primarily driven by domestic revenue, typically see average annual gains of 14% during a red wave.
Trump secured both the popular and electoral votes, defeating Vice President Kamala Harris to become the 47th president in January 2025. He pledged, “Nothing will stop me from keeping my word to you, the people. We will make America safe, strong, prosperous, powerful, and free again. I ask every citizen to join me in this noble endeavor.” Following his remarks, stock futures surged, with the Dow gaining 1,500 points on Wednesday and reaching 44,000 for the first time later in the week.
“This is what lower regulation and taxes look like,” said Great Hill Capital Chairman Thomas Hayes. Trump intends to cut regulatory hurdles in sectors like housing and energy, promoting his “drill baby drill” approach. He is also pushing for an extension of the Tax Cuts and Jobs Act of 2017, set to expire in 2025, and aims to reduce the corporate tax rate from 21% to 15%, while addressing government inefficiencies with a committee led by Elon Musk.
STOCK INFLOWS SPIKE AFTER TRUMP VICTORY
Over the past week, key S&P sectors saw consumer discretionary rise by 7.7%, industrials by 6%, and energy by over 5%, while utilities and consumer staples lagged. The Federal Reserve supported the stock market by cutting interest rates by 25 basis points and signaling a continued path toward lower rates.
Fed Chairman Jerome Powell stated, “We’re on a path to a more neutral stance that has not changed since September. We’ll assess the data over the next six weeks to guide our decision in December.” Over 64% of market participants anticipate another rate cut in December, with further reductions expected in 2025.
