S&P 500 Has Its Best Week Since November Election: Markets Wrap

18 Jan 2025

Riyadh - Maaal

Nasdaq US stocks

Stocks powered ahead to notch their best week since the November presidential election just ahead of Donald Trump’s inauguration, Bloomberg reported.

Most groups in the S&P 500 rose, with the gauge up 1% on Friday. Nvidia Corp. and Tesla Inc. led gains in megacaps, while Intel Corp. jumped more than 9% after a report the chipmaker is an acquisition target. Also aiding sentiment were headlines that Trump and Chinese President Xi Jinping discussed trade, TikTok and fentanyl, which could set the tone for relations between the world’s two largest economies. Bonds also rebounded this week, with 10-year yields down about 15 basis points in the span.

Trump, who is set to be sworn in as the 47th US president on Monday, has reiterated his focus on core priorities such as cutting taxes and raising tariffs. Equities soared following the election on bets the new administration will enact pro-growth policies that will boost Corporate America. While stocks faltered last month on hawkish Fed signals, recent data showing cooling inflation reignited bets on rate cuts.

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“This week’s easing inflation data and a positive reaction to earnings from several financial companies resulted in a bond and stock rally,” said Craig Johnson at Piper Sandler. “Recent short-term oversold conditions and weak bullish sentiment are underpinning the recovery of the major indices from within their primary uptrends.”

When Trump takes his oath as the next US president on Monday, stock investors will have one big reason to breathe a sigh of relief. History shows the performance of the equities benchmark over a three-month period usually improves after inauguration day.

History shows that the average three-month performance of the S&P 500 going into the ceremony is just about 1%, compared to a 3.7% rise on the way out, according to Jefferies’ analysis of data going back to 1929.

The index “typically trades lumpy around inaugurations,” the firm’s strategists said, but things start to improve a few months in. In fact, on average the S&P gains 8.3% six months into an inauguration and about 9.5% 12 months in, according to Jefferies.

Trump’s return to the White House will likely shield US stocks from a big selloff, according to Bank of America Corp. strategists, as investors focus on his protectionist agenda and proposals for lower corporate taxes.

US stocks are “protected by Trump” from downside, strategist Michael Hartnett wrote in a note, although he doesn’t expect sharp gains either due to risks including high concentration in mega-cap technology stocks, valuations and investor positioning.

“We continue to view US equities as attractive, forecasting that 9% earnings growth this year will drive the S&P 500 to 6,600 by the end of the year,” said Mark Haefele at UBS Global Wealth Management. “Large-caps should outperform mid- and small-caps given their greater AI exposure, better earnings trends, and less dependency on Fed rate cuts.

Sector-wise, he likes information technology, financials, utilities, communication services, and consumer discretionary.

“When you’ve had so many years should significant outperformance of US equities, it’s very difficult to then look at opportunities outside the US and think that they’re going to be any more attractive,” said Zehrid Osmani at Martin Currie Investment Management. “But valuation discipline has to be an important angle for investors. We would need to see a broadening of the earnings momentum at the moment.”