Many of us eagerly watched on election night as Donald Trump picked up an unexpected win over Hillary Clinton to become the next U.S. president. What has been even more interesting to many was the stock market’s reaction in the days following the election.
Here’s a rundown of how the markets have performed one month after Trump’s victory.
Stock Market Futures on Election Night
As a Trump victory became more apparent through the evening, the stock market futures dropped dramatically. The Dow Jones Industrial Average futures were down nearly 900 points on election night amid fears and uncertainty of a Trump administration, reported CNN.
The S&P 500 and the NASDAQ were both also hard hit overnight, in addition to many European and Asian markets.
Market Performance Post-Election
The stock market staged a stunning reversal on Nov. 9, the first trading day post election. Market strategists proposed that Trump’s late night victory speech inspired investors with his promise to focus on domestic policies benefiting business and the economy.
The Dow surged 257 points and approached an all-time high, while the S&P 500 and NASDAQ each gained about 1.1 percent.
Since the election, the stock market has rallied nicely. Between the Nov. 8 open and Dec. 7 close, several major market benchmarks have increased:
- The Dow rose from 18,332.74 to 19,549.62, an increase of 6.64 percent.
- The S&P 500 rose from 2,131.52 to 2,241.35, an increase of 4.76 percent.
- The Russell 2000 index, an index of small cap stocks, rose from 1,195.14 to 1,364.51, an increase of 14.17 percent.
Nobody knows for sure what causes the stock market to move up or down over a short period. That said, there is no shortage of speculation in the media and among financial experts.
One potential source of fuel for the rally is speculation that Trump intends to lower income tax rates and boost fiscal spending. Both could have a positive impact on the economy and the stock market going forward. Lower tax rates would give American consumers more disposable income, which could help fuel the economy and potentially drive up companies’ earnings. Lower corporate tax rates would help boost earnings and stock prices of many corporations.
Boosting fiscal spending would likely manifest itself in the form of infrastructure spending. On the campaign trail, the President-elect touted a $1 billion infrastructure investment over a 10-year period, according to CNN. This could potentially have a positive ripple effect on the economy and stock market. Construction companies and suppliers would benefit directly from the extra spending. It could also create jobs and fuel consumer spending.
Trump has also pledged to dismantle or at least revamp the Affordable Care Act, also known as Obamacare. As a result, European drug stocks have rallied.
Future Impact on the Markets
What impact will a Trump presidency have on the stock market in the future? The answer is anyone’s guess. Here are a few thoughts.
- Potential changes in the capital gains tax are coming. One version eliminates the 3.8 percent Medicare surcharge on capital gains, which could make investing more attractive for the wealthy.
- Many big banks and institutions on Wall Street recently bumped up estimates for the stock market based on some of the President-elect’s policies.
- One proposal that could have a positive impact is a plan to allow companies like Apple to repatriate cash held overseas without paying onerous taxes currently in place. This money could be used to invest in their growth or fund stock buybacks. Both options could boost stock prices of the impacted companies.
- Trump’s plan to impose hefty tariffs on certain international goods — mainly those from Mexico and China — could restrict economic growth.