The markets for stocks and other “risk-on” assets such as cryptocurrencies leaped forward after the U.S. presidential election. The knee-jerk reaction sent the S&P 500 stock index to a record last Monday, November 11. That level was nearly 4% higher than the market’s close on Election Day.
Credit for the strength seems to go to investors’ hope of lower taxes and fewer regulations during Donald Trump’s second term as president. Also, some analysts suggest that tariffs could boost U.S. manufacturing, driving a surge in domestic spending and investment. Meanwhile, other investors are simply breathing a sigh of relief that the election has passed and are getting off the sidelines, putting their capital to work.
Whatever the reasons, the market rally reassures us about the value of patient, long-term investing. In our view, it underscores the worth of using history as a guide when building long-term investment portfolios.
The strength reminds us that the stock market is forward-looking and resilient over spans of time, regardless of political leadership or uncertainty. To wit: the U.S. stock market attained new all-time highs this year not only after the election but also many times before the election.
The market doesn’t move higher in a straight line, and there could be a return of volatility. Remembering the new highs being made last week will help us stick to that long-term perspective over the months and years ahead.
Have a great week!