A long and often divisive Presidential election season ended with a victory for Republican former President Donald Trump over Democratic Vice President Kamala Harris. President-elect Trump has proposed several specific economic policies that could represent a notable change from current and past policies. However, details have yet to be spelled out, and it is too early to determine the potential capital market impact that could result.
Along with Trump’s victory, Republicans regained control of the U.S. Senate. With several races still in flux, it is not clear the size of the Republican majority. Control of the House, which was narrowly in Republican hands prior to the election, is still uncertain, though Republicans may be on a path to retaining control. This would provide Trump with the support of both houses of Congress, likely enabling fewer obstacles in passing his legislative priorities, like what President Joe Biden enjoyed in the first two years of his current term.
Short-term impact
The day following the election, the U.S. stock market generated dramatic gains, with the Dow Jones Industrial Average, S&P 500 and NASDAQ Composite Indexes reaching new record highs. At the same time, fixed income markets lost ground, with the yield on 10-year U.S. Treasury securities rising significantly on the first, post-election trading day.
Stocks continued what has been a second consecutive year of strong gains. In apparent response to the election outcome, small company stocks and Energy and Financial sectors performed particularly well. This is what Rob Haworth, senior investment strategy director for U.S. Bank Asset Management, anticipated. “Our expectation has been that much of the election outcome’s impact will be seen at the sector level, with certain industries benefiting from new policies, while others may face more headwinds.”