 "It’s all bullish in the end")
A stretch that goes down as the best week for US stocks in two years has been anything but easy money for the traders who had to navigate it.
Three distinct narratives have driven trading, combining to lift the S&P 500 Index more than any time since 2014 and give the Dow Jones Industrial Average its best week in five years. Stocks rallied on Monday and Tuesday on speculation Hillary Clinton would win the presidency, then posted almost equally big gains Wednesday and Thursday as investors warmed to Donald Trump’s fiscal stimulus policies.
The week ended on a down note for the S&P 500, as gains in banks and drug stocks were pared. In the middle was an hour-long election night plunge that would’ve lopped $1 trillion from the S&P 500 had it come during regular trading hours.
“The last two to three days have had everything to do with re-pricing in a complete regime change,” said Kevin Caron, a Florham Park, New Jersey-based market strategist and portfolio manager who helps oversee $180 billion at Stifel Nicolaus & Co. “You have markets that now have to contend with the idea of a much larger fiscal push then they were expecting just a few days ago. You’re seeing a big rally in economically sensitive assets.”
The S&P 500 rose 3.8 per cent in the five days, while the Dow rallied 959.38 points for its best week since 2011. Small caps in the Russell 2000 Index surged 10 per cent. The Nasdaq 100 Index added 1.5 per cent.
Along the way, the Dow also closed at record for the first time in three months as investors snapped up what they calculated would be beneficiaries of a Trump presidency. The surge in stocks following a presidential election echoed 1996 and 1972, when the blue-chip index made fresh highs after victories by Bill Clinton and Richard Nixon.
Exchange-traded funds tracking US equities took in $16.3 billion of fresh cash on Wednesday and Thursday, data compiled by Bloomberg show. It included $8 billion of inflows into a security tracking the S&P 500 that was the biggest in 14 months. It was the first week in history that had two days with more than 12 billion shares traded.
It’s only 72 hours after the election but going by reactions in big chunks of the stock market, investors aren’t waiting around to find out how hard it will be for Trump to enact his economic agenda. They’re shooting first without a clear read on how strong a tie he’ll forge with the Republican Congress, a key to getting potentially deficit-swelling proposals like tax cuts and spending implemented.
Banks surged 11 per cent in the five days, the most since 2009, on speculation that the president-elect and Republican-controlled Congress will roll back regulations. Trump’s promise to revive the nation’s infrastructure sent industrial shares soaring more than 7.5 per cent, with commodities needed for everything from airports to bridges expected to benefit, according to Goldman Sachs Group.
Small caps also benefited from the election news, extending a rally to six days and leaving the Russell 1 per cent below an all-time high it hasn’t eclipsed in 18 months.
