Stocks Surge Following Trump’s Election as Investors Embrace Pro-Business Policies

After Americans elected Donald Trump president for a second time last week, with less chaos than anticipated, stocks “melted up.”

The small-cap Russell 2000 led the charge, rising 8.6%. The S&P 500 and Dow Jones Industrial Average both increased by 4.6%, while the tech-heavy Nasdaq Composite jumped 5.7%.

Three key factors contributed to this market rally.

A Strong Political Mandate

Firstly, the presidential election results matter. With Republicans controlling both the Senate and the House, and Trump’s significant lead in the Electoral College and popular votes, a clear mandate has emerged. This shift signals potential pro-business reforms that may inspire economic growth, energizing both Wall Street and Main Street.

InvestorPlace CEO Brian Hunt argues that regardless of personal feelings about Trump, it’s wise for investors to prepare for upcoming stock gains in his administration. (For more insights, you can read Brian’s full essay here.)

Federal Reserve Decisions Support Market Growth

The second catalyst is the Federal Reserve. Last Thursday, November 7, the Fed unanimously decided to reduce key interest rates by 0.25%. Although the Fed indicated it might limit further cuts, Chair Jerome Powell stated that current policy remains “restrictive.” This suggests at least one more rate cut is likely, with the timing dependent on future inflation and jobs reports.

The Anticipated Early “January Effect”

The third factor is an anticipated early “January effect.” This phenomenon occurs when individuals invest more in the market as the year ends, through retirement accounts, employer contributions, or financial gifts. This influx generally supports small- and mid-cap stocks.

However, stocks often need to “back and fill,” digesting their gains after such surges. Recently, the Russell 2000 fell by 1.8%, the S&P by 0.3%, the Dow by 0.9%, and the Nasdaq by about 0.09%. Yet, expectations for a rebound remain strong. Historically, stocks have rallied leading up to Thanksgiving, with the S&P 500 averaging a 3.81% increase in November over the past decade.

The festive season brings heightened consumer sentiment, which typically boosts stock value as investors become more optimistic.

Anticipating Further Market Gains

Looking ahead, I expect sustained stock market growth in the coming weeks, driven by the early January effect. I’ll be focusing on fundamentally strong stocks—such as those I recommend in Accelerated Profits—which are likely to lead the charge.

For example, Paymentus Holdings, Inc. (PAY) recently reported impressive quarterly results, surpassing analysts’ earnings and revenue expectations. In the third quarter, the company posted earnings of $19.6 million, or $0.15 per share, along with record revenue of $231.6 million. This reflects a remarkable 79.5% growth in earnings and a 51.9% increase in revenue compared to the year before.

Analysts had predicted earnings of $0.09 per share and revenue of $190.63 million, meaning Paymentus outperformed expectations by 66.7% in earnings and 21.5% in revenue.

Management expressed confidence in their performance, expecting fourth-quarter revenue between $215.0 million and $220.0 million—up from $164.8 million last year and above analysts’ projections of $203.62 million.

This positive momentum caused PAY to soar 27% on Wednesday, as illustrated in the chart below:

This stock isn’t alone in its surge. Another top pick from Accelerated Profits doubled last week after smashing analysts’ earnings estimates by 228% and raising its fiscal year 2024 outlook. This propelled the stock with a 102% increase during the same period, contributing to an impressive total return of approximately 200% in just nine weeks!