“Do your duty and a little more and the future will take care of itself.”
-Andrew Carnegie
Here’s what you need to know this week:
- Former President Trump clinches the nomination to become America’s 47th President
- A review of the initial market reaction and an early look ahead to President Trump’s second term
- The Federal Reserve makes their next interest rate decision and faces an uncertain future
President Trump Part Two
The 2024 election is in the books and former President Trump claimed a decisive victory over Vice President Kamala Harris to become America’s 47th president. This victory makes President Trump the second person to ever win the presidency in non-consecutive terms, joining the ranks of Grover Cleveland. Results also point towards Trump winning the popular vote; if so, he would be the first Republican candidate since 2004 to claim that honor[1].
Republicans are celebrating more than just the presidential election: as of writing, Republicans appear to have secured a Senate majority and are on pace to claim the House of Representatives as well, potentially pulling off a “trifecta”[2]. A unified government would likely mean that President Trump will be able to accomplish more of his promised agenda (more on this in a moment).
Market Reaction
The early market reaction to the election news is very positive. The S&P 500, Dow Jones, NASDAQ, and Russell 2000 all notched all-time highs on Wednesday. Like we said in our blog two weeks ago, this is not particularly surprising. Large market participants such as banks and investment funds hedge their investments heading into presidential elections and the relief of unwinding these hedges tends to push markets upwards once the election is over:
(source: BlackRock)
Certain sectors rallied harder than others in anticipation of Trump’s return to the White House. The financial sector led all market sectors, followed by closely by the energy and industrial sectors; small cap stocks also enjoyed a strong surge. Bonds were the big loser of the day: Treasury yields reached their highest point since April, potentially indicating that investors expect a resurgence of inflation in the coming months. You never want to read too much into any individual market day, but the early reaction should certainly help settle investors’ nerves in the short term.
Looking Ahead
It is obviously much too early to make sweeping predictions for a second Trump term but there are a few major themes that are already moving to the forefront. First is the Tax Cuts and Jobs Act (TCJA) of 2017, often colloquially referred to as the “Trump Tax Bill”. Many of the tax cuts implemented by the TCJA are programmed to sunset at the end of 2025 unless Congress extends them. With a potential unified Republican government, an extension of these tax cuts appears more likely.
The rest are murkier. President Trump has repeatedly promised stringent tariffs on foreign goods, which may bring more manufacturing back to the US but may also contribute to inflation. Trump has also emphasized his commitment to halting illegal immigration and deregulating multiple industries such as the oil & gas industry. The final composition of the House of Representatives may impact the likelihood of enacting these policies, so investors and analysts will be closely following the final House races to glean additional insights into Trump’s second term.
Federal Reserve Uncertainty
With the election behind us, markets will quickly have to pivot to the next interest rate decision from the Federal Open Market Committee (FOMC) coming later today. As of writing, the bond market is treating a 25 basis point (0.25%) rate cut as a virtual certainty at 99.7%[3]. Rather than the rate cut itself, analysts will be watching the bond market’s reaction. Bond yields surprised many analysts by rising after September’s 0.50% rate cut, to the dismay of potential homebuyers. As I said above, rising yields imply expectations of future inflation, so an additional spike in yields might mean that investors believe the Federal Reserve is cutting rates too quickly.
Lastly is uncertainty around Federal Reserve leadership. Fed Chairman Jerome Powell was initially nominated to his position by President Trump in 2018 and President Biden renominated him in 2022. The position of Fed Chair has a four year term and no term limits so it is possible that Powell continues in the role.However, Trump and Powell’s relationship was turbulent during moments of Trump’s first term, particularly during the market drawdown during the fourth quarter of 2018. Again, it is much too early to make assumptions on Trump’s second term, but Fed leadership will likely be a major theme heading into 2025.
What Else
- The price of gold reached yet another new all-time high at $2,800/oz last week and then fell following the presidential election
- The OKC Thunder have started the year 7-0, tied with the Boston Celtics as the best record in the NBA
- OU plays Missouri this Saturday at 6:45 PM on the SEC Network
- OSU plays TCU this Saturday at 6:00 PM on FS1
What We’re Reading
“Smell-ovision” may have been a more outlandish promise of past science fiction, but some museums are attempting to make it a reality. From the scents of extinct flowers, Martian soil, T. Rex breath and even dark matter, a number of museums are attempting to engage your olfactory system as part of their displays. Click below to read about this unusual idea and how these exhibits have developed:
What’s Happening Downtown
The Devon Ice Rink in the Myriad Gardens opens this Friday, November 8th and runs through February 2nd. The rink is open seven days a week although hours vary depending on the day. Admission is $14 per person including skate rentals and $9 if you bring your own skates. Click below to learn more:
Written by: Kane Ogle, CFP®
Steve Beck, Amber Eduvigen, CFP®, Kane Ogle, CFP®, Cale Olbert, CFP®, Brett Valentine, Brandon Ingerson, Jenni Hess, Anne Boone
Sources: [1] USA Today [2] New York Times [3] CME FedWatch