Following the US elections on November 5, 2024, the stock market experienced significant positive shocks. The victory of ex-president Donald Trump encouraged growth in stocks related to various industries that have had success under his administration before, along with others such as Bitcoin and standard index funds like the S&P 500 and the Dow. The stocks surged partly because investors decreased their involvement in riskier securities out of fear of uncertain election outcomes and also because key sectors blossomed in anticipation of the new president.
The S&P climbed to an all-time high the day after the election. The index represents the 500 largest companies listed on exchanges in the United States, indicating that the market benefitted from the election’s result. However, this is not particularly unexpected as stocks generally react positively to the conclusion of political turmoil and instability. The S&P 500 has historically achieved a median return of 4% between November elections and the end of the year. This time, it fell short of that in only a few days following the election results. However, it did not stand alone as other indexes witnessed similar outcomes like the Nasdaq which was up almost 5 percent. At the time of writing, the S&P has lost practically all the gains made during that period.
According to Goldman Sachs, estimates suggest that financials, small capitalization companies, and fossil fuel-related stocks will outperform the market and such indexes, while renewable energy stocks are expected to fall behind. The small-cap companies are projected to experience growth due to Trump’s proposed tax cuts and looser regulations. This was reflected in the small-cap stock index, Russell 2000 which surged 5.8% to its highest level since 2021.
Despite these spikes, some fear and instability remain among the ranks of investors who are considering Trump’s stance on international trade and protectionist policies. There exists a degree of warranted concern regarding the potential volatility in foreign relations with the Republicans at the helm, particularly with China as tariffs of up to 60% for Chinese-made products have been foreshadowed. Trump’s tariffs will most likely cause markets to suffer but the general economic uncertainty will probably cause more damage than the tariffs themselves once implemented, and at this time this uncertainty is starting to pick up speed. This feeling was mimicked in the European markets, where stocks dipped sharply following the election but started picking back up as clarity was provided on Trump’s plans regarding trade with the old continent.
Market boosts visualized after Trump’s Victory on November 6, 2024. Courtesy of Reuters.
Should the Trump-style economic warfare ensue from his election, we may see some stocks benefit as they did under his previous administration. During the trade conflicts in his last time out, the stocks that stood out were in domestically oriented industries such as utilities, telecom services, and real estate. On the other hand, automobile, capital goods, and technology hardware stocks underperformed. This contrasts with the 2024 election results, where some technology companies have been among the frontrunners of market success. The prime example is Tesla, whose stock increased by 39% throughout the week after the election. Although, this is largely attributed to the close relationship between Mr. Trump and Elon Musk, Tesla’s CEO. Some other individual stocks that exploded after election day were private prison companies such as CoreCivic and Geo Group with 76% and 75% growth rates respectively. The latter has expressed optimism about increasing sales by 25% in 2025 once the new president’s focus on crime and illegal immigration bears fruit. Similarly, Axon Enterprise experienced the greatest growth out of all S&P 500 companies (40%) due to their taser guns expecting much greater demand once the new administration sets about equipping their police officers for their increased activity.
However, the most impressive returns were probably seen in cryptocurrencies and related stocks. Bitcoin is in the spotlight, hitting an all-time high of over $90,000 and prompting the question of whether this price hike warrants the consideration of its more widespread implementation. This is attributed to the 67% increase in Coinbase stock, which is the leading cryptocurrency exchange platform, and the 49% growth achieved by MicroStrategy, a software company that holds a lot of Bitcoin in its assets. Other industries that profited include banks, private equity, and oil companies.
The soar of bitcoin after the Trump victory visualized, courtesy of BBC News.
Conversely, renewable energy stocks came out of the frenzy as the main losers due to fear of Biden’s tax breaks and subsidies being halted by Mr. Trump when he comes to power. Orsted, the world’s largest offshore wind farm developer, went down by 14.5% while turbine manufacturer Vestas also decreased by more than 13%. The S&P Global Clean Energy Index fell around 6%.
Additionally, losses were reported by companies in sectors that are vulnerable to the tariffs that are on the horizon. According to the Financial Times, the Stoxx 600 autos and parts index fell 2% and BMW and Volkswagen saw drops of 8% and 5% respectively before rebounding slightly. Similar downward pressure was felt by shipping companies due to fear that a full-on trade war between the US and China was plausible shortly. Finally, American real estate suffered heavily, not matching the growth achieved by other equities. Companies that own data storage facilities, communications infrastructure, and physical storage companies alike all reported losses and the real estate sector of the S&P 500 dropped about 2.7%.
It is safe to say that Donald Trump’s re-election is having a substantial impact on the stock market, both in the USA and worldwide. The tariffs he plans to implement will radically change the economic landscape and flood the markets with extreme instability at a time when little seems to be certain.
Featured image: Donald and Melania Trump pictured after being named the winner of the November 6 election, courtesy of Bloomberg.
