The election results brought a wave of positivity from investors. The S&P 500 jumped by 2. 5%, the Dow Jones by 3. 6%, and the NASDAQ by 2. 95%. The Russell 2000, which tracks small companies, skyrocketed by 5. 8%. This reaction came from the belief that a Trump administration, teamed up with a Republican Congress, could bring policies that boost the economy.

Two key policies could drive this growth: lower taxes and reduced regulations. The Tax Cut and Jobs Act (TCJA) from 2017 is set to expire, but Trump has promised to extend and expand these tax cuts. This includes excluding certain incomes like Social Security benefits and tips from taxes. However, extending these tax cuts could add to the national debt, which might be why bond investors were less excited.

Bond prices dropped, and yields rose due to concerns about the deficit and potential new tariffs. Tariffs are essentially taxes on imported goods that are paid by importers, not the exporting countries. These costs can be passed on to consumers, making tariffs a hidden sales tax. The small stock index surged because many of these companies are domestic producers, benefiting from potential new tariffs.

The Federal Reserve recently lowered interest rates to a range of 4. 50 – 4. 75%, citing solid growth and progress on inflation. However, potential Trump policies could complicate their decisions. If inflation rises, interest rates might stay higher than expected.

During the press conference, Fed Chair Jerome Powell was asked about resigning due to Trump’s criticism. Powell simply answered, “No. ” This event highlighted the complex relationship between the Fed and the President.

Investors Cheer Trump's Return, but Not Everyone’s Thrilled

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