While the week had got off to a cautious start ahead of the election, equities cheered the victory of Donald Trump on Wednesday, as well as Republicans taking the Senate and looking set to retain control of the House of Representatives. Stocks breathed a sigh of relief on the decisive result, eliminating a hurdle of uncertainty, while cheering the hope of greater economic growth. The S&P 500 ended the week up at 4.7%, briefly crossing the 6,000 milestone on Friday. All eleven of its sectors saw gains, with banks, technology and industrials amongst the best performers. The Dow Jones Industrial Average was up 4.6%, briefly touching 44,000 for the first time, with both indices seeing their best weekly performance since November 2023. The tech-heavy Nasdaq Composite was up 5.7%, while the small-cap Russell 2000 jumped 8.6%.
On Wednesday the US dollar index had jumped 1.5% to its highest level in four-months. While it later pulled back owing to some profit-taking, the index was still up for the week. Another ‘Trump trade’ beneficiary was bitcoin, rising nearly 10% for the week and ended at a fresh record above $76,700 on hopes the Trump administration will be a boost to cryptocurrency. Away from the election, Thursday saw the Federal Reserve cut its interest rate by a quarter point, with chairman Jerome Powell stating that the incoming administration would not have a near term impact on its monetary policy decisions. Treasury yields had jumped higher in response to the election result, however, they subsequently reversed course after the Fed meeting. The yield on the 10-year note ended marginally lower at 4.30%, snapping its run of weekly advances.
Although European markets initially joined in with the US election enthusiasm, this quickly turned to caution over the potential tariff implications on the region. The pan-European STOXX 600 lost 0.8%, its third consecutive weekly loss. While the political picture in the US became clearer, the same could not be said for Germany, where the coalition government collapsed. Despite this, the German DAX’s losses were actually more modest than most of the regional indices, dropping 0.2%. There were also a number of central bank meetings in Europe, with Sweden’s Riksbank cutting rates by half a percentage point, the Bank of England cutting by a quarter point while Norges Bank was on hold.
Chinese equities had a particularly strong week, shaking off the Trump victory and instead focusing on the National People’s Congress (NPC). Investors were optimistic for additional stimulus measures, and indeed the NPC approved a RMB 10 trillion programme to finance local government debt, as expected. However, given the threat of Trump’s trade policy, some were left underwhelmed that more was not announced. Trade data for the week was mixed, with exports rising 12.7% year-on-year in October, more than expected, while imports dropped 2.3%. For the week the Shanghai Composite jumped 5.5% and the Hang Seng saw a 1.1% rise.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.