Historically, presidential elections have often had notable effects on the financial markets, with varying impacts across different sectors, driven by policy expectations, regulatory shifts, and economic reforms. The stock market often experiences a “relief rally” once the uncertainty of an election is resolved.
TRUMP’S WIN
With Trump’s win, this post-election relief may be influenced by investor expectations for economic policies, potentially focusing on tax cuts, deregulation, and industry-specific incentives. Early indications from market futures and initial reactions suggest a cautiously optimistic outlook, with many investors expecting pro-business policies, similar tothose of Trump’s previous administration. Here's an overview of what investors have seen so far, post-election.
THE STOCK MARKET SOARS THE DAY AFTER THE ELECTION
The S&P 500 rallied to a record high the day after the presidential vote as uncertainty about the outcome faded. “I don't think many people had it in their playbook that we would know the next president by 11 am on Wednesday,” says Brian Garrett, head of Equity Execution on the Cross Asset Sales desk in Global Banking & Markets at Goldman Sachs. Previous US elections have taken days or longer to play out, and Garrett highlights that the two-day normalized decline in the VIX (the CBOE Volatility Index) was one of its largest in the past decade.
WHY?
US stocks surged in part because many clients had reduced the amount of risk in their portfolio amid uncertainty about the results of the election, Garrett says on an episode of Goldman Sachs Exchanges. Investors have since re-engaged some of the trades that were successful after the 2016 presidential race, such as buying financials, small caps, technology, and energy stocks, he says. The resolution of political uncertainty is a key, near-term driver for stocks and tends to drive strong year-end returns following a presidential election, Kostin writes.
The S&P 500 index has historically generated a median return of 4% between Election Day in November and calendar year-end. Combined with the recent resilience in economic growth data and the expectation for more rate cuts by the Federal Reserve, the near-term outlook for US equities is “healthy,” Kostin writes.
FORECAST FROM GOLDMAN SACHS
The S&P 500 is still projected to climb some 9% to 6300 in the next 12 months, David Kostin, chief US equity strategist at Goldman Sachs Research, writes in the team’s report. GS’s researchers forecast growth in earnings-per-share of 11% in 2025 and 7% the year after, though Kostin points out that those estimates may change as more about the new administration's policy agenda is revealed. “Robust earnings growth should drive continued equity market appreciation into next year,” he writes.
“THE GOLDEN AGE”
In a recent interview, Scott Bessent, one of the top candidate for Treasury Secretary in The Trump Administration, shared his sparkling economic forecast. Bessent stated, “We had a great economy under Trump 1.0. We could have a GOLDEN AGE for the next four years.We're going to have peace, and we're going to have this technology boom.” (By Kristen Altus, Fox News, Full Article Linked Below).
Based on Mr. Bessent’s optimistic economic forecast, it is highly likely that the real estate market will feel these positive effects, fueling a robustluxury market.
THE BOTTOM LINE
As always, investors are advised to take a long-term view, remembering that the stock market tends to reward patience and strategic planning beyond election cycles. Diversification across sectors can offer stability as the market adapts to new policy implementations. As with any election, staying informed, balancing portfolios, and taking a long-term view can help investors navigate post-election market changes with confidence.
Data From Goldman Sachs:
https://www.goldmansachs.com/insights/articles/how-trumps-election-is-forecast-to-affect-us-stocks?utm_campaign=jenn%27s-blast-nov-10-%28quick-send%29&utm_content=read-more-%7C-goldman-sachs&utm_medium=email&utm_source=activepipe
Data From Fox News:
https://www.foxnews.com/media/trumps-potential-treasury-pick-gives-vision-economy-get-ready-golden-age