US markets began Donald Trump’s Presidential term with a strong rally led by the Dow Jones and Smallcap names. The Nasdaq underperformed but still ended higher as big tech shares like Apple were under pressure.
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Over 400 shares in the S&P 500 rose, with the gauge up almost 1% as Trump is expected to announce a new investment push for artificial intelligence led by Softbank Group Corp., OpenAI LLC, and Oracle Corp.
Trump’s flurry of executive orders helped boost space shares, while weighing on electric-vehicle makers. An ETF focused on big Chinese firms gained as the US president so far refrained from announcing tariffs on the Asian nation.
Netflix shares surged 14% in extended trading after blowing past estimates and crossing 300 million paid subscribers.
The yield on 10-year Treasuries declined seven basis points to 4.56%. The Bloomberg Dollar Spot Index was little changed.
For Joe Biden’s entire presidency, the Dow Jones Industrial average rallied 39.4% — about 18 percentage points less than the four years under his Trump’s first administration — and over 100 percentage points less than the 149.4% during the eight years of the Obama era, according to data compiled by Bespoke Investment Group.
“While the Dow’s performance under Biden was the weakest of the last three presidents, it was still nothing to sneeze at, and it caps off a third straight period of strong gains under a presidential term,” Bespoke said. “Let these performance numbers serve as a reminder that as an investor you should never let your politics and investment decisions overlap.”
Since 1993, the top four sectors from election day through inauguration day posted an average calendar-year increase of 17% versus the S&P 500’s average 15.9% rise and outperformed the broad benchmark 75% of the time, Stovall said. Even better, the top-10 S&P 500 sub-industries posted an average calendar-year increase of 26.8% and also beat the market 75% of the time, he concluded.
This time around, there are early signs that investors are preparing for equity laggards to rally on bets that Trump could take a softer-than-feared stance on global trade, according to a survey by Bank of America Corp.
If concerns around Trump’s tariff proposals prove to be “unfounded,” investor allocations would remain risk-on and stock markets that have trailed the powerful rally in the US would play catch up, BofA strategist Michael Hartnett said.
The latest dovish inflation readings are “game-changers,” and should provide a Goldilocks backdrop for risk assets over the coming months, HSBC says.
The bank’s strategists led by Max Kettner expect only very shallow drawdowns in the coming months and would use any dips to boost risk asset exposure. They say sentiment and positioning are still flashing a buy signal.