Republicans win the US elections and market celebrates.

Stocks soared on this busy week that featured additional quarterly results, another rate cut from the Fed, and more importantly, the outcome of US Congressional and Presidential elections. The day after the election, the Dow Jones rose by more than 1,500 points (+4.6%), the Russell 2000 soared 5.8%, the Nasdaq Composite surged 3.0%, and the S&P 500 gained 2.5%. This represented the market’s best post-election performance ever.

There were two main factors that drove the market higher. The first one was a sense of relief from investors that the results were decisive and no risk of a contested election. The second is that investors believe president-elect Donald Trump along with a Republican controlled Congress will push lower tax rates and decrease regulations which will foster economic growth. 

Among the big winners last week were small caps, banks, Bitcoin, and the US Dollar which surged against other major currencies.  Although there were many individual stocks that outperformed, it was notable that Telsa (TSLA) gained 29%.  On the surface, one would not expect an EV car company to benefit from a Republican controlled government, but investors seem to be betting that Elon Musk’s influence on Trump will somehow benefit the company.

Thursday’s FOMC policy announcement didn’t deter the market rally. The unanimous Fed vote to cut the target range for the fed funds rate by 25 basis points to 4.50-4.75% was largely expected. Fed Chair Jerome Powell reiterated that policy is not on a preset course and that decisions will be made on a meeting-by-meeting basis. Separately, Powell made it clear that he would not step down if asked by Trump to do so.  Powell’s term expires in early 2026.

In other news, NVIDIA (NVDA) and Sherwin-Williams (SHW) replaced Intel (INTC) and Dow Inc. (DOW) in the Dow Jones Industrial Average as of Friday, November 8.