MarketLens
Market Overview
Following Donald Trump’s victory in the U.S. Presidential Election, all three major stock indexes reached record highs this week.
Economic Insights You Need to Know
The Federal Reserve cut interest rates by 25 basis points yesterday to 4.75%, the lowest level we've seen since February 2023. The Fed is expected to slash rates by another -0.25% in December. Interest rates are predicted to drop -0.50% to -1.00% throughout 2025.
Mortgage rates have continued to rise since the Fed’s initial rate cut in September, with the 30-year fixed mortgage rate now at 6.79%. Additionally, the 10-year Treasury note yield has risen as much as 0.8% since the start of the week.
Typically, when the Fed lowers interest rates, both Treasury yields and mortgage rates tend to decrease, making borrowing more affordable. However, the current rise in these rates is likely due to investor optimism about market growth under the Trump administration. Stock prices surged following the election results, as Trump’s proposed tax cuts are expected to boost corporate profits and drive stock prices higher.
Meanwhile, bond investors are worried about potential inflation resulting from Trump's policies on deregulation and tariffs. From a bond investor's perspective, the possibility of higher inflation means wanting more in interest to compensate for the expected decline in purchasing power over time.
The graphs below from Federal Reserve Economic Data show a 10-year view of the S&P 500 and the University of Michigan Consumer Sentiment Index. While the stock market has been reaching record highs, the UMCSI shows that consumer sentiment remains low. These graphs illustrate that other factors besides the stock market, including high mortgage rates, rising unemployment, and low consumer sentiment, all influence the economy.
This disconnect shows the contrast between the consumer class and the investor class. Consumers facing high-interest debt often remain pessimistic as they struggle to cover basic expenses, with little to invest. Meanwhile, investors continue to benefit from record years in both the stock and cryptocurrency markets.
Election Day Results: What It Means, Why It Matters
What Happened?
Donald Trump became the 47th President of the United States in the early morning hours of Nov. 6 after the AP called the state of Wisconsin with its 10 electoral votes going to Trump. The Republican party also flipped the Senate and, while the control of the House of Representatives is not final, Republicans are also expected to take the majority.
Market Reaction
The S&P 500 jumped 1.5%, the NASDAQ was up 2%, the Dow soared to new record heights. The Russell 2000 increased by 4.2% at the open Wednesday morning. The value of the dollar jumped 1.8% while Bitcoin reached a new record high above $75,000 in response to the news. The 10-year Treasury Note increased by 16 basis points to almost 4.5%. Tesla stock jumped over 13% and Elon Musk’s net worth increased by about $20 billion. This is a testament to how investors feel about the future of economic growth under the Future of the Trump Administration.
What Now?
Wall Street has long been a fan of Trump’s economic growth policies and how they benefit from them. Looking back to Trump’s previous time spent in office, we know he focuses on tax cuts, tariffs, deregulations, and dealmaking in geopolitics. During Trump’s time in office from 2016-2020, the S&P 500 was up 70%.
Under President Trump’s tax policies of a 15% corporate tax cut, Bank of America predicts a +4% earnings increase for all S&P 500 companies. This indicates these companies’ stock price is expected to rise because of increased profits.
A big component of Trump’s economic plan focuses on creating job growth within the U.S. and increasing U.S. manufactured goods. Tariffs are a key way Trump intends to execute this plan. The former president has discussed implementing a tariff on about 10% of all imported goods, with a specific 60% tariff on goods imported from China.
Stock of the Week: Palantir
Palantir (NYSE: PLTR) saw its stock jump 15% on Tuesday after reporting strong Q3 earnings and raising its future outlook. Revenue from its U.S. government division grew 40%, while its commercial sector expanded 54% year-over-year, largely driven by demand for AI products.
U.S. Business News
Boeing negotiated a deal with its 30,000+ union workers after an almost two-month-long strike. The machinists are expected to receive a 43% pay increase over four years with other benefits. Boeing was reported to have lost over $6.1 billion during Q3 alone. Its stock price was up almost 2% in response to the news.
Meta announced it will be allowing U.S. government agencies and defense contractors to use its AI product, Llama, to create tools for military and intelligence use. Palantir and Lockheed Martin are among the defense contractors named.
Taiwan Semiconductor (TSMC) reported a 29.2% year-over-year revenue increase but announced it would halt advanced chip production for Chinese companies, including Alibaba and Baidu, potentially impacting future financial performance. This is TSMC's slowest revenue growth since early February.
Chip company Qualcomm beat Q3 revenue and profit expectations, with a 12% increase in smartphone chip production and an 81% rise in automotive chip revenue.
Here’s what we learned from Berkshire Hathaway’s earnings report this week: Berkshire has over $325 billion in cash, $288 billion of which has been invested into short-term treasury bills.
Warren Buffet has sold about $133 billion worth of stock this year, while he has bought only $5.8 billion.
Buffet notably hasn’t used any cash to buy back Berkshire Hathaway stock.
These actions may indicate that Buffet thinks stock prices are too high at the moment.
Tesla saw its stock jump 14% on Wednesday after the Presidential election was decided. Elon Musk was one of Donald Trump’s endorsers. The impact of their relationship is likely to benefit Musk’s SpaceX company over the next four years.
Airbnb reported Q3 earnings, with revenues up 10%, beating expectations. The company’s profits underperformed in Q3 and its stock price initially rose 5% but was down 6% Friday morning.
Lyft saw its bookings grow by 16% in Q3 and reported their riders increased by 9%. The company also reported solid guidance, helping its stock rise 24% on Thursday. Lyft also plans to bring self-driving cars to its platform through its partnership with Mobileye.
Overseas Updates
Since 2020, the U.S. government has taken an aggressive approach to blocking China from receiving advanced AI chips. TSMC, the largest chip maker in the world, announced this week that it would no longer be providing China with advanced AI chips. The U.S. has expressed concerns about backdoor acquisitions of these chips through other countries. The move by TSMC comes as no surprise, as the U.S. has long feared that China uses advanced-model chips to initiate cyber attacks.
China’s stock market took a hit after Trump’s victory in the U.S. presidential election. Trump plans to enact tariffs on the import of Chinese-manufactured goods which in turn, will hurt Chinese businesses.
Israel’s president, Benjamin Netanyahu, congratulated Trump on Wednesday after winning the U.S. election. Israel celebrated Trump’s victory as the former president has notably supported Israel’s “right to win its war on terror”, as described by NBC’s Chantal Da Silva and Alexander Smith. Israel is optimistic that under Trump’s presidency, the nation will be provided support to achieve victory against Hamas.
Russian President Vladimir Putin congratulated Trump on his election win Thursday. Putin also cited that the Kremlin is ready and willing to discuss how Trump will handle the situation between Ukraine and Russia. Trump’s strategy to de-escalate Russia’s war on Ukraine would likely focus on reducing U.S. involvement, pursuing a negotiated settlement, and encouraging European allies to take on more responsibility.
News in Sports
NFL
Thursday Night Football: The Baltimore Ravens defeated the Cincinnati Bengals 35-34.
Sunday Night Football: The Houston Texans will host the Detroit Lions
Monday Night Football: The Los Angeles Rams face off against the Miami Dolphins
NCAA Football
SEC: No. 3 Georgia vs. No. 16 Ole Miss, No. 11 Alabama vs. No. 15 LSU
Big-10: No. 6 Penn State vs. Washington
ACC: No. 4 Miami vs. Georgia Tech
Big-12: No. 20 Colorado vs. Texas Tech
NBA
Western Conference Standings
1. Phoenix Suns
2. Oklahoma City Thunder
3. Golden State Warriors
Eastern Conference Standings
1. Cleveland Cavaliers
2. Boston Celtics
3. Indiana Pacers
Closing Remarks
Nvidia has regained its position as the most valuable company worldwide, surpassing Apple.
The cryptocurrency industry invested $135 million in backing over 50 political candidates this election season.
The tech sector now constitutes 32% of the S&P 500.
Monday, Nov. 11 is Veterans Day.
Stay with us for more insights next week.
Disclaimer: This is not financial advice or a recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
Ashlyn Haringa