The stock market has surged to record highs following Donald Trump’s re-election as President of the United States. On Wednesday, the Dow Jones Industrial Average logged its best day in two years, with the S&P 500 and Nasdaq Composite also reaching new heights. John Bai, a finance professor at Northeastern University, attributes the post-election market exuberance to two main factors: a swift election result and expectations of Trump’s proposed economic policies.
“The number one rule in the stock market is that it doesn’t like uncertainty,” Bai says. “But it does like the end of uncertainty.”
In 2016, when Trump was first elected, election night uncertainty led to a sharp drop in Dow Jones Futures, only for the market to rebound the next day. This time, as results came in on election night, Trump’s performance was strong from the start and maintained momentum throughout the evening and into Wednesday.
The quick resolution of the election, without extensive legal challenges or delays, provided a boost to investor confidence.
Post-election market surge
Additionally, expectations that Trump’s policies would mirror those from his first term, such as corporate tax cuts and a pro-growth agenda, further buoyed the market.
Trump has signaled intentions to put billionaire Elon Musk in charge of curbing government waste. However, Trump’s tariff plan could raise costs for households, as seen during his first term when hefty tariffs were imposed on foreign goods. Bai points out that Trump’s first term featured a trade war with China, a global pandemic, and a stock market characterized by “wild swings and overreaction.”
For new investors, Bai suggests now is as good a time as any to enter the stock market.
“If you are an inexperienced investor and just want to get in the game, I think the best bet is to go with the overall market indices: the S&P 500, Nasdaq,” Bai advises. For those looking to diversify, exchange-traded funds (ETFs) can also be a good addition to a portfolio. “The United States is still the leading technological engine, and if policies shift back to the U.S., consumers could benefit depending on price levels and how things play out,” Bai explains.
As investors look optimistically towards the future, the anticipation is that Trump’s economic policies will continue to shape market trends in his second term as President.
