[Christian Harris]

US stocks shot up yesterday (Wednesday, 6th Nov 2024) as investors appear optimistic about a Trump win, seeing his potential policies as a positive for business.

The S&P 500 rallied 2.53%, showing optimism from the broader market​.

During the last trading day the index fluctuated 1.21% from a day low at 5,864.89 points to a day high of 5,936.14 points.

5,864.67 resistance now becomes support. The next major resistance level is 6,000.00.

Data: FactSet, Morningstar, S&P Capital IQ, ProRealTime, MarketScreener

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[Steve]

Yesterday’s trading session was also quite eventful, with all three major U.S. indexes hitting record intraday highs.

I’ve come across commentary suggesting that, in the long run, a president’s impact on the markets may be limited once the initial reactions subside. However given Trump’s strong association of the economy with his own success, the situation here feels quite different.

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[Christian Harris]

I agree, Steve.

For a few months, the US stock markets have shown signs of being overextended, especially in sectors like technology, industrials, and consumer defensive stocks.

High-growth areas, such as tech stocks fuelled by AI enthusiasm, have traded at premium valuations, even after substantial gains over the past two years.

Although the market has remained resilient, correction risks exist, significantly if economic growth slows as projected for 2025​.

The recent election of former President Donald Trump has led to what some are calling a ‘Trump trade’, characterised by rallies in specific sectors like crypto.

His past administration’s policies generally favoured deregulation, which could bring renewed optimism in specific industries if similar approaches are anticipated.

Historically, stocks have performed well during transitions, regardless of political outcomes. However, it’s important to remember that the composition of winners may shift based on policy expectations​.

In this climate, fixed-income investments are becoming more appealing as they could offer better returns relative to elevated equity valuations.

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