Wall Street welcomes you go up the decision of The Federal Reserve (Fed) will follow the expected path and cut interest rates by 0.25 points to the 4.5%-4.75% range. Although US stock markets opened on mixed ground following Wednesday’s euphoria over Donald Trump’s victory in the presidential election, the country’s major stock indexes posted gains as the hours ticked by. After the Fed’s decision, the Nasdaq rose by 1.51%, while the S&P500 gained 0.74%. For his part, the Dow Jones ended the session flatly. Other values that rose yesterday, such as Trump Media, fell by 22.97%.
The victory of the Republican, who will begin his second term as president of the United States in January, was yesterday well received on Wall Street which reached historic levels: Him Dow Jones rose by 3.57% to 43,729 points, the S&P500 grows by 2.53% to 5,929 points and the Nasdaq It advances by 2.95% to 18,983 points. According to analysts at MFS Investment Management, a new Republican mandate will likely benefit small caps in the United States “given its national focus and sensitivity to tax rates.”
Among the sectors that will benefit most from Trump’s mandate in the coming years is fossil fuel companies and the financial sectoras “probably less severe” regulation is expected from the winner of the presidential elections. On the other hand, European and emerging markets, especially automotive companies, will be “the most vulnerable” during his presidency, as will those related to renewable energy. And bitcoin, the benchmark cryptocurrency in the Trump-backed sector, rose 1.41% after reaching an all-time high of $75,000 yesterday. The Republican promised to make the United States a true cryptocurrency paradise, which is why digital currencies celebrated their victory.
Second cut in more than four years
The Fed is committed to doing so second interest rate cut in more than four years after the first drop of 0.5 points in mid-September. Between March 2022 and July 2023, the organization increased them at an unprecedented pace to combat the inflationary crisis at 5.25 points. Now, according to the latest data from October, inflation is at 2.4%, the lowest level recorded since February 2021. His proposal is also accompanied by other values that interest the Fed before continuing with its policy monetary cuts, such as unemployment, which remains contained at 4.1%.
In principle, the institution chaired by Jerome Powell had envisaged two more interest rate cuts before the end of the year, but this proposal expired with Trump’s return to the White House. The president-elect’s program includes tax cuts without reductions in government spending, which implies an increase in the deficit and is inflationary, therefore The Fed’s monetary policy plans will depend on Trump.
Interview between the Time.news Editor and Market Expert
Editor: Thank you for joining us today. With the recent Fed decision to cut interest rates by 0.25 points and Donald Trump’s victory in the presidential election, Wall Street has been buzzing. Can you break down the implications of these developments for investors?
Expert: Absolutely, it’s an exciting time in the markets! The Fed’s rate cut to a range of 4.5%-4.75% was widely anticipated. Lower interest rates generally make borrowing cheaper, which can stimulate spending and investment. As a result, we often see positive movements in stock prices, as we did with the Nasdaq rising 1.51% following the announcement.
Editor: It seems that Trump’s election win also played a significant role in rallying the markets. How do you foresee this second term impacting different sectors?
Expert: Trump’s victory is indeed fueling optimism, especially in sectors like fossil fuels and finance. Investors anticipate less stringent regulations under his administration, which could lead to significant growth opportunities in those industries. Small-cap stocks might also see a boost due to their sensitivity to domestic policies, particularly tax rates.
Editor: That’s fascinating. However, not all stocks are benefiting equally. We saw a notable drop in Trump Media’s shares after the election. What are the reasons for such volatility within specific companies?
Expert: Great observation. Stock prices can be highly sensitive to company-specific news and overall market sentiment. Trump Media’s decline by nearly 23% could reflect concerns about its long-term viability and reliance on Trump’s political capital. Markets often react not just to general political outcomes but also to the individual circumstances of companies within that landscape.
Editor: Considering the broader market trends, what strategies should investors employ in light of these developments?
Expert: Investors should look to diversify their portfolios, focusing on sectors likely to benefit from the political landscape, like energy and finance. At the same time, it’s important to remain cautious—evolving regulations and geopolitical events can impact the markets quickly. Keeping an eye on emerging market dynamics, especially in Europe and the automotive sector, could also offer opportunities for growth.
Editor: That’s valuable advice. To wrap up, what’s your outlook for the markets as we head into the new year?
Expert: As we approach 2024, I expect continued volatility, but also growth fueled by reduced regulatory burdens for certain sectors. The sentiment following Trump’s election could bolster the markets in the short term, but investors should remain vigilant, as external factors—like global economic trends and domestic policy changes—can always shift the landscape.
Editor: Thank you for your insights. It’s clear there’s a lot to watch as the new political and economic climate unfolds. We appreciate your expertise!
Expert: Thank you for having me! It’s always a pleasure to discuss these crucial issues.