Market Milestones: A Week of Surprises
The past week will be remembered for its unprecedented events, with the presidential election taking center stage. The swift and decisive victory of Republican Donald Trump over Democrat Kamala Harris sent shockwaves through the stock market, propelling the Dow, S&P 500, and Nasdaq to all-time highs.
Federal Reserve Meeting Takes a Backseat
Thursday’s Federal Reserve meeting, which resulted in an interest rate cut, was overshadowed by the election’s aftermath. The rate cut was a welcome bonus for market bulls, with the S&P 500 and Nasdaq experiencing gains. The Dow remained flat on Thursday but surged above 44,000 for the first time ever on Friday, along with the S&P 500 topping 6,000.
Record-Breaking Week
All three stock benchmarks closed the week at record highs, with the Dow and S&P 500 gaining over 4.6% and the Nasdaq rising 5.7%. The top-performing sectors were consumer discretionary, energy, industrials, financials, and information technology.
Gridlock in Washington: A Preferred Scenario
Historically, Wall Street has favored a divided government, where one party controls the White House and the other controls Capitol Hill. While the presidential race has been decided, the balance of power in Congress remains uncertain, with several House races still too close to call.
Trump’s Economic Legacy
President Trump has often tied his success to the market’s performance. During his first term, the S&P 500 gained 67%. As he hands over the reins to President-elect Biden and Vice President Harris, he leaves behind a healthy economy with moderating inflation and a strong stock market.
Economic Reports and Earnings Ahead
In the coming week, two government inflation reports will be closely watched by Wall Street and the Fed. Earnings season is winding down, with only two major companies, Home Depot and Disney, set to report quarterly results. The October consumer price index, scheduled for release on Wednesday, is expected to show a 2.6% annual increase in headline CPI.
Home Depot and Disney: Key Earnings Reports
Home Depot’s earnings report will provide insight into the housing market, while Disney’s experiences business will be under scrutiny due to recent hurricane activity and inflation concerns. The company’s theme park business, including Disneyland Paris, may also be affected by the Summer Olympics.
Market Outlook
As the Fed enters easing mode, market odds favor another rate cut in December. With bond yields dropping on Thursday and Friday, investors are hopeful that this trend will continue. The coming week will be crucial in shaping the market’s direction, with economic reports and earnings taking center stage.
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