Markets rocket upward on Trump win, interest rate cuts
Nick Rummell
MANHATTAN (CN) — The election of Donald Trump had an immediate effect on markets, with all three indices hitting new record highs, though experts wonder how long the rally will last.
On Wednesday, markets skyrocketed after Trump’s win, with the Dow Jones Industrial Average closing the day up about 1,500 points. The S&P 500 and Nasdaq had similar outings, and all three equities had their best week in roughly a year.
By the closing bell on Friday, the Dow picked up 1,939 points to finish at 43,991 points, while the S&P increased by 267 points and the Nasdaq netted 1,047 points, each setting new record highs.
Tom Essaye of the Sevens Report wrote in an investor’s note the day after the election that Trump’s election “should spur a rally into year-end, barring any other major surprises” due to investors’ belief the incoming administration will feature a pro-growth policy agenda.
However, he noted the risk of tariffs and deficits could pose a risk to markets next year. “As in 2016, markets will likely look past some of Trump’s commentary, and as such, don’t expect trade volatility or fiscal concerns to impact markets until 2025, but it is reasonable we all brace for a more volatile market in 2025 than we’ve had in 2024,” he wrote.
Others echo those worries. “We remain highly skeptical that the Republicans will delivery any large fiscal stimulus,” Paul Ashworth, chief North America economist at Capital Economics, wrote in an investor’s note. “Instead, to our minds, the combined drag from immigration curbs and new tariffs mean that, in net terms, Trump’s return is likely to be a negative for the economy.”
Analysts at Capital Economics added in a separate note that “bond vigilantes are stirring, and the risk of an even bigger adverse reaction could intimidate Republicans into forsaking another big package of deficit-financed tax cuts.”
Investors also were once again buoyed by an interest rate cut by the Federal Reserve, which this time opted for a 0.25% reduction. The federal funds rate now sits at the 4.5% to 4.75% range.
The central bank made no mention of the election in its accompanying statement, and during the presser Fed Chair Jerome Powell made only two comments related to Trump: he will not resign and Trump does not have the legal authority to fire him.
The University of Michigan also released its preliminary survey of consumer sentiment, which showed a 1.5-point increase this month. The survey concluded on Monday and did not take into account any election results.
The survey is still well below the peak seen in early 2020, and the university noted in a statement that “consumers remain frustrated about the persistence of high prices … [but] consumers expressed fewer priced concerns about major purchase relative to October.”