Say it with me: “President-Elect Donald Trump.” Fun, isn’t it? Wall Street seems to think so. The financial markets are apparently optimistic as to what a second Trump term might look like because they’re exploding all over the place, with the Dow shattering the 1,000-point mark on Wednesday and other markets showing similar gains. It’s a boom!
The Dow Jones Industrial Average surged 1,425 points to a record high, or around 3.4%. The last time the blue-chip Dow jumped more than 1,000 points in a single day was in November 2022. The S&P 500 also hit an all-time high, popping 2.4%. The Nasdaq Composite climbed 2.8% to a record of its own.
NBC News projects that Trump will defeat his Democratic rival, Kamala Harris, after winning 276 Electoral College votes, including key swing states of Pennsylvania, North Carolina and Georgia. Follow CNBC’s 2024 election live blog here.
Investments seen as beneficiaries under a Trump presidency erupted as the former president appeared set to claim victory. Tesla, whose CEO Elon Musk is a prominent backer of Trump, saw shares surge 14%. Bank shares got a boost with JPMorgan Chase climbing 10% and Wells Fargo jumping 12%.
That’s not surprising. At least one financial market maven has some thoughts as to what’s behind this sudden boom:
“Trump is viewed as supporting lower corporate tax rates, deregulation, and industrial policies that favor domestic growth, all of which could provide more stimulus to the U.S. economy and benefit risk assets. … During the 2016 election, the S&P 500 Index gained nearly 5% from the day before the presidential election through the end of the year in what became known as the Trump rally. We expect a similar trend could play out this time around, too,” Marc Pinto, head of Americas equities at Janus Henderson Investors, said in a note.
In simple terms, the market is looking at the Trump victory and saying “Let the good times roll!” But there’s more to economic, fiscal, and monetary policy than just the effect on the stock markets.
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President-Elect Trump has talked about deregulating Bitcoin and other cryptocurrencies. He has talked about increasing federal revenues and incentivizing investment by lowering marginal tax rates. He has made a lot of promises about international trade, tariffs, and pushing for American companies to on-shore operations, all of which would be good for the economy.
But there’s more that must be done, and one thing in particular stands out: Were I able to ask Donald Trump one question at this juncture – after giving him his well-deserved congratulations – I’d ask, “What about the debt?” We are at almost $36 trillion and rising rapidly.
President-Elect Trump, in his first term, didn’t seem too concerned about the national debt. What will he do this time around? We are likely past the point where we can deal with this by growing our way out of it. We can’t get out of it any other way without causing a global financial meltdown. What’s to be done?
OK, I hate to be a Debbie Downer on a big day like this. For the time being, we can still count this stock market boom as a win. Let the good times roll! But remember – sooner or later, that other bill will come due.
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