Stocks are on track for their best week of 2024 as post-election optimism lit a fire under already strong sentiment on Wall Street.
Traders work the New York Stock Exchange on Wednesday.
Major indexes were largely flat Friday—the blue chip Dow Jones Industrial Average gained 0.4%, the leading S&P 500 rose 0.2% and the tech-heavy Nasdaq inched down 0.1% by 10:15 a.m. EST—but are up big for the week.
The Dow’s 4.2% gain has it on track for its strongest week since Nov. 2023, the S&P’s 4.5% weekly rally would also be its best since last November and the Nasdaq’s 5.7% jump its steepest since September.
All three major U.S. indexes are well on their way to their highest ever weekly close.
The Russell 2000, which tracks 2,000 smaller American companies with a median market capitalization of about $1 billion, is up 7.7% for the week, tracking toward its best advance since June 2020.
The initial market reaction to Trump’s projected victory was sharp, as the Dow’s 3.5% gain Wednesday and the S&P’s 2.5% rally were each index’s best days since 2022. Goldman Sachs strategists led by David Kostin laid out several reasons for the gains, including reduced political uncertainty, as tightly contested presidential elections like 2024’s typically precede strong stock gains, the prospect for lower corporate tax rates as Republicans took control of the Senate and grapple for a House majority and, perhaps most importantly, the potential for “more relaxed” regulatory bodies and an uptick in dealmaking. Goldman estimates a reduction from 21% to 15% in the corporate tax rate would boost its earnings estimates for S&P companies by 4%.
The potential for more corporate mergers and acquisitions sent shares of investment banks surging, as Goldman, JPMorgan Chase, Morgan Stanley and Wells Fargo stocks all are up at least 6% since Tuesday, hitting respective record share prices. Arguably the most notable winner is the Elon Musk-led electric vehicle firm Tesla, whose shares are up 23% since Tuesday as the market reacted favorably to the win by the Musk-championed candidate. Other notable gainers this week include artificial intelligence giant Nvidia (shares up 10%), data-focused defense contractor Palantir (36%) and automakers Ford (7%) and General Motors (8%).
All three of the major U.S. indexes hit all-time highs this week. Stocks performed slightly better during Trump’s first presidential term compared to Joe Biden’s, as the S&P provided an annual return of 16% annual return under Trump compared to 14% thus far under Biden, according to FactSet data. The yearslong strong stretch for equities came as the U.S. navigated the COVID-19 pandemic and the worst inflation in four decades, with resilient economic growth and investor optimism about the profit potential of generative AI helping buoy the rally in recent years.