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The US stock market as well as other risky assets are favored in the current political and economic context in the US, where the Republican Donald Trump won his second term in the White House and the majority in the US congress, and stocks have historically appreciated after the presidential elections, as it appears from the international press.
On election day, the S&P 500 gained 1.23%, and the Dow Jones gained about 1%. The Nasdaq Composite, of companies operating in knowledge-intensive industries, rose 1.43% while Bitcoin reached a new all-time high of over $75,000.
Solita Marcelli, chief investment officer for the Americas at UBS Global, says that over the long term, US-listed stocks are attractive and should be supported by economic growth, lower interest rates and the structural support provided by artificial intelligence. regardless of the election result, writes CNBC.
The UBS executive's optimism is shared by Michael Brown, senior research strategist at Pepperstone. "Economic growth continues to be solid, corporate earnings growth during the third quarter reporting season was solid, and the so-called "Fed put" (a.k.a. the belief that the Federal Reserve will have loose monetary policy to support markets) continues to support the markets. Now that the election uncertainty is gone, the direction is clear for further gains through the end of the year," Brown said, as quoted by Business Insider.
According to the American publication, supporters of Trump's proposed tax policies and regulations see them as pro-business moves that can increase company profits and facilitate transactions. Also, the protectionist policies of the Republican president are perceived as very favorable to smaller companies, included in the Russell 2000 index, whose operations are mainly domestic.
• Major U.S. indexes have appreciated between Election Day and the end of the year since 1980, according to CNBC
The US stock market has typically risen after presidential elections, history shows, but investors should be prepared for short-term turbulence, writes CNBC. According to data collected by the American publication, since 1980, the three major US indexes, namely the S&P 500, Dow Jones and Nasdaq, appreciated on average between election day and the end of the year, but the markets did not register always on a direct upward trajectory immediately after the results are announced.
All three indexes had losses on Election Day and the week leading up to the election, but over the course of a month, the market trended to recover much or most of those losses, according to CNBC data.
This means that investors should not necessarily anticipate a strong rise in the US stock market in the first days after the election, the American publication also notes.
• Morgan Stanley sees S&P 500 at over 6,000 by year-end
Mike Wilson, chief investment officer at Morgan Stanley, believes the U.S. stock market is poised to continue its rally as election uncertainty fades, but believes valuations will soon become too high, according to Business Insider.
The strategist sees the S&P 500 at 6,100 by the end of the year, up 5.5% from its Election Day close, but believes the index has no upside as valuations now trade at nearly 22 times earnings and it is unlikely that the economy will have strong enough growth to support the expansion of multiples next year. In Wilson's view, some fiscal consolidation will have to occur in 2025, which will bring uncertainty and likely send the stock market on a roller coaster ride.
On the other hand, Trump's return to the White House means uncertain trade policy and geopolitics, with negative implications for economic growth and European business, according to Berenberg's chief economist Holger Schmieding, Reuters writes.
• Investors are counting on the fact that regulations in the United States will further support the crypto industry, writes CNBC
Trump's victory is perceived as beneficial for Bitcoin and the crypto industry in general, according to international media. In addition to Bitcoin benefiting from the narrative that it is a hedge against inflation, investors are betting that the regulatory environment in the United States will be more supportive of the crypto industry, as Trump promised on the campaign trail. Among the moves made by Trump is the replacement of the chairman of the Federal Reserve, Gary Gensler, perceived as an opponent of the crypto industry, writes CNBC.
"For many, Bitcoin is a hedge against currency devaluation and inflation because it operates outside the traditional constraints of monetary policy," said Naeem Aslam, chief investment officer at Zaye Capital Markets, quoted by Business Insider.
"Trump's victory may create the right conditions for Bitcoin to continue its ascent as investors seek alternatives to the dollar," he added. According to CNBC, after the 2012, 2016, and 2020 elections, Bitcoin saw returns of about 87%, 44%, and 145%, respectively, in the 90 days following the election, due in part to the fact that election years are -they overlapped with the years when the so-called "halving" of Bitcoin took place, when the supply of cryptocurrency decreases.
• Traders are betting on another Fed rate cut of 25 basis points, according to CME FedWatch
Beyond the election, investors await today's Federal Reserve meeting and Chairman Jerome Powell's comments on the US central bank's future monetary policy moves. Traders are betting on a 25-basis-point rate cut, after a 50-basis-point cut in September, according to the CME FedWatch tool.
Year-to-date through the first part of this week, the S&P 500 was up a strong 21%, an unusually strong showing before the election, while the Dow Jones was up 12%. The Nasdaq Composite, of companies active in knowledge-intensive fields, had an advance of around 23%. At 14:30 yesterday, Bitcoin was trading at $74,400, after hitting a new all-time high of $75,353, according to an index calculated by Investing.com.
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