US markets react to Trump 2024 victory: Initial boost fades amid policy uncertainty

Investors and market analysts closely watched US markets, expecting a reaction to this political shift, and early signs show an initial rally, followed by growing caution as investors brace for potential policy changes.

At the opening bell, the Dow Jones Industrial Average jumped over 1 percent, while the S&P 500 and NASDAQ Composite also saw significant gains.

The rally was largely driven by sectors that benefitted during Trump’s previous administration, such as energy, financials, and defense.

Oil and gas companies saw a rise amid speculation that the administration will adopt policies more favorable to traditional energy, potentially rolling back regulations in favor of expanding oil and natural gas production.

Defence stocks also surged, with expectations that Trump’s “America First” agenda may bring renewed focus on military spending.

Major defence contractors such as Lockheed Martin and Northrop Grumman saw shares rise by several percentage points.

While some sectors celebrated the election results, others, particularly technology and renewable energy, saw a less enthusiastic response.

Big Tech companies like Google and Meta experienced minor declines, driven by concerns that Trump’s approach to tech regulation may shift toward closer scrutiny, especially given his previous criticism of social media and large tech corporations.

Investors are concerned that regulatory pressures could lead to increased operational costs and potential restrictions.

Renewable energy stocks, which had flourished under the Biden administration’s green initiatives, saw a dip amid fears that Trump’s presidency could reverse climate-focused policies, potentially stalling growth in wind and solar energy.

Companies specializing in green technology, such as Tesla and NextEra Energy, traded slightly lower as the market assessed the potential impact on subsidies and federal incentives for clean energy.

The dollar strengthened against major global currencies, as the victory added short-term certainty to the US political landscape.

However, investors are cautious about the dollar’s long-term trajectory, with some bracing for volatility depending on Trump’s fiscal and trade policy stance.

In the bond markets, US Treasury yields ticked up as the Federal Reserve indicated it will closely monitor economic indicators amid potential fiscal policy shifts.

Analysts expect the Fed to maintain its cautious stance, particularly as inflation concerns remain a priority.

A significant area of focus for investors is the potential return of Trump’s protectionist trade policies.

Companies with large international footprints, particularly in China, are bracing for possible tariffs or other trade restrictions.

Multinational corporations have voiced concerns about supply chain impacts, should Trump reinstate tariffs or restrict trade with certain countries.

Conversely, domestic-focused industries, particularly manufacturing, received an early boost, anticipating potential incentives aimed at promoting US-based production.

While US markets enjoyed a temporary rally, financial analysts are urging investors to tread carefully, noting the likelihood of high volatility as Trump’s specific policy directions become clearer.

Sectors that benefit from Trump’s traditional stances on energy, defence, and infrastructure are likely to see gains, but companies depending on global trade and environmental incentives may experience significant shifts.

As Trump prepares to assume office in January, the markets are likely to remain sensitive to any announcements regarding cabinet appointments, fiscal stimulus, and trade.

Investors will closely monitor signals from the administration to gauge whether Trump’s approach will mirror his first term or adapt to a different economic and geopolitical landscape.

Overall, while Trump’s victory has brought a temporary boost to certain sectors, market stability will largely depend on how his administration balances fiscal conservatism with economic growth initiatives.