President Trump has won reelection; what does that mean for investors?

Let’s discuss.

As of writing, Republicans have won the White House and a Senate majority, and may win a House majority.¹

Markets reacted to the news by rallying to new highs.²

Does that indicate they see president-elect Trump’s promises as favorable for stocks?

Or is it simply a reaction to an end to election-related uncertainty? We believe markets react positively when the uncertainty of elections has now been addressed (meaning we now know who was elected).

History can offer us some clues.³

On average, stocks tend to rise after an election after a small short-term drop.

But you can see in the chart below that the last two elections have resulted in an immediate pop.

Please note, it is not possible to invest directly into the S&P 500® Index; this measure is provided solely as a gauge of overall market performance. Standard & Poor’s: “Standard & Poor’s®,” “S&P®,” and “S&P 500®” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”). The historical performance of the S&P 500 is not intended as an indication of its future performance and is not guaranteed. This chart is not intended to provide investment, tax or legal advice. Be sure to consult a qualified professional about your individual situation. Richmond Brothers has not independently verified the data presented. We believe its ultimate source, Refinitiv, a subsidiary of the London Stock Exchange Group, uses uniform methodologies in collection to produce reliable detailed revisions and consensus data. This chart does not take into account investment fees or the reinvestment of dividends, so actual results will be different than depicted above.

Will this year’s positivity remain? We’ll see.

While past performance is a guide, it’s not a guarantee.

Markets are likely to remain volatile in the weeks and months ahead as investors digest data and adjust their positions leading into the new year.

Longer term, what can we expect for the economy?

The Federal Reserve recently voted to cut interest rates again.⁴

While small rate cuts may not make an immediate impact on the consumer rates you see, they start to add up over time.

If the Fed continues on the rate-cutting path, we could expect to see a cumulative impact on mortgage rates, credit cards, and other consumer and business debt next year.

President-elect Trump campaigned on major economic issues such as tariffs and tax cuts.

Generally speaking, tariffs are considered to be inflationary because they may increase the cost of goods.⁵

However, the economic impact will largely depend on the size and breadth of any tariffs imposed as well as overall economic conditions.

Tax cuts generally help spur growth (though they can add to the national deficit), and we can anticipate that many provisions of the 2017-era cuts will be extended after 2025.⁵

Remember, current income tax brackets/rates are set to expire by December 31, 2025 if no action is taken by Congress.

Overall, we’ll see what the new administration chooses to prioritize and how much sway Congress will exert on the agenda.

Bottom line: who wins an election is just one factor affecting markets and investors.

As we approach the end of 2024, we’re thinking ahead to 2025 and we will be evaluating options and strategies to consider for our clients, but we may not need to make any substantial changes. We’ll want to see what the bigger priorities are coming out of the White House that affect investors and retirees, such as tax law changes, anything to do with Medicare or Social Security, to name a few.

We’re optimistic about where markets and the economy are headed (based on current economic indicators) and will reach out with updates as we have them.

If you’re not already using our Smoother Ride investment strategies (or something similar) please reach out. These strategies are designed to add some safety nets to the market side of your financial portfolio.

Don’t blink, or 2025 will be here before we all know it! If you have questions, please feel free to reach out to us at 517-435-4040 or questions@richmondbrothers.com.

We are honored to help educate, inform, and guide you through your retirement no matter what the world puts in our path.

Sources:

1. https://www.270towin.com/2024-election-results-live/
2. https://www.cnbc.com/2024/11/05/stock-market-today-live-updates.html
3. https://www.cnbc.com/2024/11/04/what-the-stock-market-typically-does-after-the-us-election-according-to-history.html
4. https://www.cnbc.com/2024/11/07/fed-rate-decision-november-2024.html
5. https://www.wsj.com/economy/what-a-trump-win-means-for-the-economy-50de4670

Chart Source:
https://www.cnbc.com/2024/11/04/what-the-stock-market-typically-does-after-the-us-election-according-to-history.html

Content prepared by Snappy Kraken and Richmond Brothers, Inc.

Richmond Brothers, Inc. is an SEC-Registered Investment Adviser.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
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