The Trump Bump May Give Way to the Trump Slump
US President-elect Donald Trump’s victory rally has given way to a lackluster performance in the stock market, with the S&P 500’s return since Election Day standing at just 0.5%. If this trend continues through Inauguration Day on January 20, it would mark the worst performance for the broad index between an election and inauguration since Barack Obama’s inauguration in 2009.
The S&P 500 soared to record highs following Trump’s victory, with investors optimistic about the potential for tax cuts and deregulation that could benefit corporations. The Dow Jones Industrial Average surged over 1,500 points the day after Election Day, but focus has since shifted to inflation and the path of interest rates going forward.
The shift in focus has poured cold water on the initial rally, with the S&P 500 actually down more than 1% excluding the one-day gain the day after Election Day. The market is now taking a closer look at indications of sticky inflation and spiking Treasury yields, which have complicated Trump’s path to major economic changes.
Recent job numbers, which showed the economy added 256,000 jobs in December, have led policymakers to question whether Trump’s plans for wide-reaching tariffs or tax cuts will be feasible. If these policies can get across the finish line, some on Wall Street and the Federal Reserve have expressed concern that they will contribute to inflation.