As the 2024 U.S. presidential election results roll in, Donald Trump has secured a second term in the White House. Investors worldwide are closely watching the stock market to gauge this political shift’s immediate and long-term effects. Trump’s return to the presidency brings with it a set of policies and economic approaches expected to influence various market sectors.
Immediate Market Reaction
The morning after the election, investors started piling into trades aligned with his tariffs, taxes, government borrowing, and cryptocurrency policies. Historically, markets prefer certainty, and a clear election outcome reduces uncertainty. This was evident when the Cboe Volatility Index, known as the VIX or the market’s fear gauge, plunged to its lowest level since late September.
Trump’s presidential victory has put additional pressure on rates, as evidenced by the historic move to higher Treasury yields as the Trump victory became clearer. According to LPL Research, this morning’s move higher in yields is a concern (from the bond market) that Trump’s economic policies could be inflationary and could change the magnitude of Fed interest rate cuts.
Tax Policies and Corporate Earnings
During his previous term, one of Trump’s hallmark policies was the Tax Cuts and Jobs Act of 2017, which significantly reduced corporate tax rates. Investors anticipate that a renewed focus on tax cuts could boost corporate earnings. Sectors like technology and healthcare benefited from previous tax reductions and may see increased investor interest.
Trade Relations and Manufacturing
Trump’s approach to international trade, characterized by tariffs and renegotiated trade agreements, could impact global supply chains again. The manufacturing sector might experience short-term gains due to protective measures against foreign competition. However, industries reliant on imported materials could face increased costs, affecting profitability.
Infrastructure Spending
Promises of substantial infrastructure spending have been a recurring theme in Trump’s campaigns. If enacted, such spending could stimulate economic growth and benefit sectors like construction, industrials, and raw materials. Investors may look to companies involved in infrastructure projects as potential opportunities for growth.
Regulatory Environment
The Trump administration is expected to continue deregulation efforts, particularly in the financial and energy sectors. Easing regulations could lead to increased profitability for banks and fossil fuel companies. However, this might raise concerns among investors focused on environmental, social, and governance (ESG) criteria, potentially affecting investment flows into these sectors.
Healthcare Sector Dynamics
The healthcare industry could face volatility due to potential changes in policies related to the Affordable Care Act. Pharmaceutical and biotechnology companies might benefit from a lenient regulatory environment, while healthcare providers could experience uncertainty regarding insurance and reimbursement structures.
Global Market Implications
International markets are also reacting to the election outcome. Allies and trading partners are assessing the implications of Trump’s foreign policy stance. Emerging markets could experience capital outflows if protectionist policies are anticipated, while developed markets may adjust to shifts in trade dynamics.
Trump’s victory introduces a range of factors that could shape the stock market’s trajectory in the coming months and years. While some sectors may benefit from anticipated policy changes, others could face challenges due to shifts in trade and regulatory landscapes. Investors should stay informed and consider diversified strategies to navigate the evolving market conditions.
Have a blessed week!
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Opinions voiced above are for general information only & not intended as specific advice or recommendations for any person. All performance cited is historical & is no guarantee of future results. All indices are unmanaged and may not be invested directly.
The economic forecast outlined in this material may not develop as predicted & there can be no guarantee that strategies promoted will be successful.
Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.
