Donald Trump's return to the White House has investors keenly observing the implications of potential new tariffs, the labor market effects of immigration cuts, and possible benefits to leading technology firms, analysts expressed while reviewing the outcomes of the business magnate's victory. Trump, who is the Republican nominee for the presidency, has triumphed over Kamala Harris, the vice president and the Democratic nominee in the recent voting.
This win makes Trump the second individual to hold the presidency in non-consecutive terms, following Grover Cleveland, who was re-elected in 1892. "Markets seem to be anticipating a rebound of Trump's deregulation initiatives from 2016-2020 and the prospect of reduced taxes, which could become more achievable if Republicans dominate both chambers of Congress," commented Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, in a recent note to clients.
"US large cap equities stand to gain from a mix of deregulation and potentially additional tax cuts. Smaller, domestic-oriented companies are expected to see advantages resulting from tariffs on imports." Following Trump's victory, stocks rallied on Wednesday, buoyed by optimism regarding the election results.
The benchmark Standard & Poor's 500 index rose by 2% in preliminary trading, the Dow Jones Industrial Average increased by 3%, and the tech-heavy Nasdaq augmented by 2%. The US dollar strengthened against the euro and British pound, alongside an uptick in Treasury yields. Trump's leadership is poised to benefit companies like Tesla ($TSLA) and other major technology firms, with the administration anticipated to have a pronounced focus on advancing artificial intelligence, representatives from Wedbush Securities noted.
Tesla's CEO, Elon Musk, has actively campaigned for Trump in recent weeks, attending several rallies and speaking on his behalf. Consequently, Tesla's stock surged by 13% in early trading sessions on Wednesday. Additionally, Trump Media & Technology Group ($DJT), the parent entity of Trump's social-media network Truth Social, experienced a remarkable 26% increase immediately after the market opened.
Following Trump's pro-crypto campaign mantras, cryptocurrency stocks also enjoyed a rise. Coinbase Global ($COIN) saw a gain of 15%, and MicroStrategy ($MSTR), a significant player in the bitcoin acquisition arena, amplified its value by 13%. Although the outlook for US economic growth next year appears stable, analysts believe it will take time for adjustments in fiscal, trade, and immigration policies to affect the economy.
Ryan Sweet, chief US economist at Oxford Economics, shared this insight in a note on Wednesday. President Trump is likely to wield his powers to impose targeted tariffs against China, Mexico, Canada, and the European Union, as indicated by Sweet. He also mentioned that a reduction in immigration could tighten the labor market's supply.
Wells Fargo analysts, however, are advocating for a longer-term perspective rather than focusing on immediate market adjustments. "It's crucial for investors to differentiate between temporary market reactions and substantial market shifts characterized by persistent price movements," Christopher stressed.
"These can represent entirely different trends.".