Stocks hit all-time highs on Wednesday following Donald Trump’s presidential re-election. Each of the three major indexes – the Dow Jones Industrial Average, the broad S&P 500 and the tech-heavy Nasdaq – rose to record highs.
Analysts said markets’ gains on Wednesday were driven by two factors: the end of election uncertainty and the prospect of a business-friendly White House and Senate. (As of Wednesday afternoon, control of the House of Representatives had not yet been determined.)
“The combination of the Fed’s easing cycle, the AI-fueled tech boom and business support is extremely bullish for the stock market,” Jay Hatfield, CEO of Infrastructure Capital Advisors, said in a statement.
The Russell 2000 index of small-cap stocks also rose Wednesday on speculation Trump-led tax and regulatory policies will particularly benefit smaller companies.
While the prospect of lower taxes and less regulation is driving stocks higher, analysts also warn that other elements of Trump’s agenda – most notably tariffs – could dampen that economic momentum.
“The prospect of a Republican victory and tax cuts increases market enthusiasm,” Yung-Yu Ma, chief investment officer of BMO Wealth Management, said in a statement. However, Ma added that such abundance may be short-lived. “This could be mitigated in the coming weeks by more information on tariff policy or a continued rise in long-term Treasury yields,” he said, noting in particular that “tariff uncertainty” is a potential headwind.
While Trump is unlikely to be in lockstep with the free-trade advocates who make up much of the Republican Party, his penchant for repealing or rolling back regulations benefits sectors that might face greater scrutiny under a Harris administration. Here’s what happened in the first hours after the markets opened after the elections.
Banking
Shares of commercial and investment banks rose as election results spread. As of Wednesday afternoon, shares of JPMorgan Chase, Wells Fargo and Goldman Sachs were up by double digits.
Strategists at BlackRock Investment Institute said in a note that a Trump administration would likely be good for financial firms. “Trump’s victory likely means some deregulation, including the deregulation of banking,” Reuters reports.
Crypto
Bitcoin rose to an all-time high, reaching $75,000 at one point. Other cryptocurrencies such as Ether also jumped, as did asset trading platforms such as Coinbase and Robinhood.
The prospect of less regulation and lower taxes on the crypto industry, coupled with the president-elect’s strong support for crypto on the campaign trail, have all driven these assets higher, Sylvia Jablonski, CEO and chief investment officer of Defiance ETFs, told CNBC. interview. Also helping to boost growth in the sector is the expectation that Trump will replace Gary Gensler, the current SEC chairman who was a thorn in the industry’s side during his tenure at the agency.
Chips
Shares of chip makers such as Nvidia and Intel jumped. U.S. chipmakers in particular stand to benefit if Trump imposes tariffs on chips imported from Taiwan, as he has suggested.
Although Trump criticized President Joe Biden’s Chip and Science Act during the campaign, political and market observers expect the law, which benefits the domestic chip industry, to remain in place. Republican lawmakers criticized the law, but much of the investment it sparked went to GOP strongholds like the Southeast. House Speaker Mike Johnson recently walked back a comment that Republicans would repeal the law if given the opportunity to do so, saying instead that he and his fellow Republicans want to “simplify” it.
Big Tech
Internet giants are likely to face a mixed bag under the Trump administration. Shares of Alphabet and Amazon, the parent company of Google, rose on Wednesday, while shares of Meta, the parent company of Facebook, Instagram and WhatsApp, fell. While both Democratic and Republican lawmakers have criticized the dominance of tech giants, Republican executives are expected to be less aggressive in pursuing antitrust and anticompetitive complaints against big tech companies, William Kovacic, a law professor at George Washington University and the agency. The former chairman of the Federal Trade Commission told Reuters.
Production of electric vehicles
Despite Trump’s — and other members of the GOP’s — rhetoric about repealing President Biden’s Inflation Relief Act, which included incentives for electric vehicle production, the fate of the electric vehicle market under Trump’s presidency is unclear.
Trump is a strong supporter of domestic oil production – and a beneficiary of these companies’ largesse when it comes to political donations – and he has said he wants to scrap initiatives and incentives to ramp up production of electric vehicles.
But the day after the election, shares of electric vehicle heavyweight Tesla surged, jumping 13% on expectations that the US company would benefit from potential tariffs on electric vehicle imports and the elimination of subsidies that Tesla’s smaller rivals rely on more heavily.
What investors should do now
While rising stocks may be tempting to buy shares of Tesla or Bitcoin, financial professionals say it’s wise to hold on to the brakes first. Advisers warn that making big and sudden changes to your investment plan based on one-time events is never a good idea.
However, this rally could be a good time to evaluate your asset allocation and determine whether you are holding too much in any sector or company. And if you’re nearing retirement or expect to have big expenses in the near future, converting some of your income into cash or certificates of deposit may be a good move.
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