The day after the election, the stock market went bananas.
Reporters at The Wall Street Journal gave the recap:
Wall Street has rarely been more excited by an election.
U.S. stocks’ capitalization rose by $1.62 trillion on Wednesday, their fifth-best one-day showing ever, following Donald Trump’s decisive election victory. The surge highlights the opportunity that investors, bankers and others in finance are hoping to embrace over four years of tax cuts, deregulation and economic expansion.1
Setting the election aside and the market’s response to the decisive victory of President-Elect Trump, there is also a seasonal argument for stocks right now. Piper Sandler, an investment bank founded in 1895, reveals that since 1928, the months between November and April have experienced the highest 6-month return window for US stocks in the S&P 500. They are positive 71% of the time, and average a return of over 5%.2
One thing to keep an eye on is the particular sectors that jumped after the election. The Wall Street Journal continues, “The sectors that jumped were similar to what bounced when he was elected in 2016: financials, energy, and industrials led the way.”3
Does this mean they will lead throughout the new Trump presidency?
Bespoke Investment Group adds some cautionary data:
Notably, the three best and worst performing sectors today were also the three best and worst performing sectors on the day after Trump won in 2016…
While it may be tempting to pile into the three sectors performing the best today because of Trump's victory, the three sectors that performed the best on the day after Election Day 2016 ended up being some of the worst-performing sectors during Trump's first four-year stint in office.4
Votes are cast in light of presidential promises and sector performance may reflect that, but a lot can happen in four years that are out of one politician’s control. Furthermore, Bespoke on Friday, November 8th noted: “US stocks are closing out the week at uniformly overbought levels at the index levels.”5 We shall see.
Let’s quit with the macro for a moment, though, and zoom in closer to home.
We don’t just vote for political candidates, state propositions, and local bonds in life. According to habit formation author James Clear, “Every action you take is a vote for the type of person you wish to become.”6
What you want your future self to be is shaped by the choices you make today.
Your investment decisions in the present will affect your investment portfolio in the future. I’ve shown how those who chose partisan politics in the past as an investment guide have been crushed by the powerful performance of compound interest. Be careful choosing to invest or not based on what you think of a President.
Let’s get all up in your business a bit more.
Your actions and attitudes toward those around you are a vote toward the person you are becoming. The legacy you leave will not just be the size of an investment portfolio but also the kind of person you are. And the kind of person you are is often revealed in how you act toward those you disagree with.
You probably will not be remembered by who you voted for, but you will be remembered by who you were.
The election may be over. The stock market may have gone ballistic to the upside, but who are becoming starts all over again today.
Don’t waste it.
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Sources:
1. “Wall Street Salivates Over a New Trump Boom”, published 11/6/2024. Accessed online: https://www.wsj.com/finance/stocks/wall-street-salivates-over-a-new-trump-boom-c32cf952?mod=hp_lead_pos1
2. Chart from Blake Millard of The Sandbox Daily. Emailed 11/7/2024.
3. See footnote 1.
4. “The Day After…2016 Redeux”. Emailed 11/6/2024.
5. On X November 8th, 2024 at 8:20 am. Accessed online: https://x.com/bespokeinvest/status/1854921911462932812