Trump's win, Dow's surge, Musk's bet, and the Mag 7: What Wall Street is saying
11/07/2024 01:21
The return of Trump to the White House has Wall Street laser-focused on potential winners and losers.
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Another four-year stay at the White House confirmed.
Former President Donald Trump has won a second term as president of the United States after a strong showing at the polls. He will be the nation’s 47th president.
Importantly, Trump won the key battleground states of Pennsylvania, Georgia, and North Carolina. A confirmed win in Wisconsin — another swing state — put Trump over the top, with 277 electoral college votes as of early Wednesday.
Republicans are also set to take control of the Senate for the first time in four years following key wins in West Virginia and Ohio. Control of the House remained in the balance on Wednesday afternoon.
The Dow Jones Industrial Average (^DJI) skyrocketed more than 1,300 points to a record 43,569 by midday as investors raced to price in tax cuts, among other policies Trump has floated. Strong gains were also notched on the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC).
"I don't know that it's too much too soon," Truist co-chief investment officer Keith Lerner said on Yahoo Finance's Opening Bid podcast (video above; listen in below). "If you think about it coming into this [election], there was a real contention between the [outcomes]. So once you gain some clarity, and it looks like this won't extend or be a contested election, there's a relief rally."
Trump's round two has unleashed a host of key trades too.
Tesla stock (TSLA) surged 14% to $286 during the session. The company's ticker page was the most active on Yahoo Finance through midday.
The win could put Tesla CEO Elon Musk in the pole position to shape electric vehicles' future given his strong backing of Trump.
“Tesla has the scale and scope that is unmatched in the EV industry and this dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players (BYD, Nio, etc.) from flooding the US market over the coming years,” Wedbush analyst and Tesla bull Dan Ives wrote in a client note.
Bitcoin (BTC-USD) prices are also moving higher, with Trump promising during his campaign to make the US a digital currency superpower. The move also likely reflects an investor bet on an SEC shakeup that could result in a more digital asset-friendly chairman.
“With Trump leading the US presidential race and GOP likely to flip the Senate, we believe the regulatory headwind for crypto has turned into a tailwind and the market is nowhere close to factoring in this shift,” Bernstein analyst Gautam Chhugani said.
Meanwhile, the 10-year Treasury is climbing. Pros believe Trump’s desire to jack up tariffs on imports and cut taxes could push up inflation, which could reduce the pace of rate cuts from the Federal Reserve.
"Overall though we think that a Trump win means higher inflation in the near-term versus the status quo with Harris, but slower growth (potentially shaving up to 0.5pp off of GDP in 2025 and 2026)," TD’s head of global strategy Rich Kelley wrote. "For FOMC policy, we think the Fed will continue to ease this year, but likely take a pause in the first half of 2025 as it waits to get a better sense of the impact of the new administration's policies on inflation and growth."
Here's what Wall Street said on Opening Bid about a couple of key topics in the wake of Trump's historic win.
"The Fed is important, but it's probably not as important as it has been. Markets are still pricing in above 90% chance of a rate cut. I think what happens really is more about the policies that compound and what does that mean for growth? What does it mean for inflation and interest rates? If we look at all this together, it likely means whatever path the Fed was on before, they're probably going to move a little bit slower if we have a little bit stronger growth, a little bit more inflation. But overall, I would prefer an economy that's strong, that supports earnings, to an economy that needs more rate cuts because it's weakening."
"Tesla was one of the shorts that I was proposing last week if Harris had won. Clearly, that's not going to happen. It's all about Musk and what Musk's going to get. And if Musk does get this role at a Department of Government Efficiency, you regulate the whole thing about self-driving, and then that is finally going to be something you can say is really different and valuable about Tesla.
"I suspect that this is probably boosterism, and it's not going to be long-term. There are some fantastic things that could well happen for Musk in a new government. And one of the things I sort of jokingly commented about last week, is imagine in Trump's second year that Musk comes in with his undoubted skills and rescues the ailing Boeing. Boeing joins with Musk's SpaceX and creates something new and really exciting."
"Definitely buy [the "Magnificent 7," which consists of Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, Meta, and Tesla], absolutely 100%. I mean, that's pretty much the one area which has strong earnings growth anywhere in the world. I just don't see earnings power anywhere else in the world. So in a world where money is coming to equities, tech looks spectacularly better than anything else."
Three times each week, Yahoo Finance Executive Editor Brian Sozzi fields insight-filled conversations and chats with the biggest names in business and markets on Opening Bid. You can find more episodes on our video hub or watch on your preferred streaming service.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email [email protected].
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