The resounding victory of Donald Trump as the 47th president of the United States of America boosted market participants’ confidence on U.S. stocks. Trump’s protectionist policies, to strengthen U.S. industries, especially the manufacturing sector bodes well for investors.
Although we are still not clear about economic policies (especially imposition of tariff and lowering of corporate tax) of the president-elect Donald Trump for his second term, the overall movement of Wall Street is likely to remain northbound due to the three main drivers.
First, the fundamentals of the U.S. economy are rock-solid. The U.S. GDP grew at 1.6%, 3% and 2.8%, respectively, in the first three quarters of 2024. On Nov 7, the Atlanta Fed GDPNow tracker estimated a 2.5% GDP growth for the fourth quarter. These numbers are higher than the pre-pandemic period.
Second, as of Nov 8, 452 S&P 500 companies have reported their quarterly financial numbers. Total earnings of these companies are up 7.1% year over year on 5.5% higher revenues, with 73.5% beating earnings per share (EPS) estimates and 61.5% beating revenue estimates. Looking at the third quarter as a whole, total earnings for the S&P 500 Index are expected to be up 7.4% from the same period last year on 5.6% higher revenues.
Third, The Fed reduced the benchmark lending rate by 25 basis-points in its November FOMC meeting after cutting an aggressive 50 basis-points in the fed fund rate in September. The Fed fund rate is currently in the range of 4.50-4.75% compared with a 23-year high of 5.25-5.5% till mid-September. The
CME FedWatch interest rate derivative tool currently shows that market participants have provided a 70% probability of another 25 basis-point rate cut in December.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
