Dow and S&P 500 Surge to Yearly Highs Following Major Republican Victory

On Friday, U.S. stock markets extended their upward trend following the recent elections, setting new records and marking the best weekly gains of the year. The prestigious Dow Jones Industrial Average surged by 259.65 points, or 0.59%, reaching an unprecedented high of 43,988.99, while the comprehensive S&P 500 index climbed 22.44 points, or 0.38%, to close at a new peak of 5,995.54. Both indices have appreciated approximately 4.7% over the week, indicating their strongest performance since November 2023.

The technology-heavy Nasdaq Composite also experienced growth, increasing by 17.32 points, or 0.09%, ending the day at 19,286.78, slightly below its newly set record of 19,318.56. Over the week, the Nasdaq has gained 5.7%.

The stock market rally gained momentum on Wednesday, fueled by expectations that President-elect Donald Trump would implement tax reductions and deregulation, according to analysts. The upward movement persisted on Thursday following the Federal Reserve’s decision to reduce the benchmark federal funds rate by a quarter percentage point, hinting at potential further easing, although the exact timing remains uncertain. On Friday, the markets received additional positive news when the University of Michigan’s consumer sentiment index rose unexpectedly to 73.0 in November, up from 70.5 in October, with inflation expectations dropping to their lowest since December 2020.

“The increase in sentiment in November, coupled with a decrease in near-term inflation expectations, has created what could be considered a ‘Goldilocks’ scenario,” explained Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.

Will the Market Uptrend Persist?

While the stock market may face intermittent pauses, many analysts foresee continued near-term growth, particularly if the Republicans secure control over both chambers of Congress. The Republicans have already captured the Senate majority, and while the count for the House of Representatives is ongoing, it is widely anticipated that they will maintain their narrow lead.

“With the Republicans sweeping the elections, we believe the outcome will continue to act as a driving force in the markets,” stated Mark Dowding, chief investment officer at BlueBay, part of RBC Global Asset Management.

Investors Re-enter the Market

Trump’s electoral victory has also seemingly encouraged previously hesitant investors to engage with the market, as suggested by recent data.

Wealthfront, an automated investment service, reported a 146% increase in new stock investing accounts the day after the election compared to the day of the election itself, with the amount of money deposited into these accounts soaring by 286%. Additionally, transfers into automated investing accounts spiked by 433% on the day following the election. According to strategists at Bank of America, approximately $20 billion flowed into U.S. equity funds the day after Trump’s win, marking the largest single-day influx in five months.

“The recent rally in the stock market likely reflects investor enthusiasm for the election results and the reduced uncertainty that typically follows the conclusion of elections, or possibly a combination of both,” said Alex Michalka, vice president of investment research at Wealthfront. “We are pleased to see millennials continue to make prudent financial choices by investing in the stock market,” he added.

Highlights in the Stock Market

This week, certain stocks and sectors have significantly benefited from Trump’s victory, such as:

• Tesla: The company’s shares skyrocketed, and its market valuation reached $1 trillion for the first time in two years, driven by investor optimism about CEO Elon Musk’s potentially favorable relationship with Trump, according to experts. Wealthfront noted a 228% surge in investments in Tesla by its clients on Wednesday, compared to Election Day.
• Bank stocks: These stocks have risen with the anticipation that the new administration will adopt a more lenient stance on mergers and acquisitions, which are lucrative for large banks, as per a report by JP Morgan analysts.
• Energy stocks: These shares have rallied following Trump’s commitment to expand drilling to ensure U.S. energy independence.
• Bitcoin: The cryptocurrency reached a new all-time high near $77,000, buoyed by Trump’s endorsement during his campaign. He proposed creating a federal Bitcoin reserve and emphasized the importance of increasing Bitcoin mining operations in the U.S.

Bond Yield Dynamics

Following Trump’s electoral victory, the yield on the 10-year Treasury note initially surged on Wednesday. Most economists believe his plans for broad tariffs, deportations, and tax cuts could expand the deficit and lead to inflation. By Friday afternoon, however, the 10-year yield had retreated to its level at the beginning of the week.