Market Update

US stocks reached record highs this week, and the dollar posted its largest intraday gain in eight years following the re-election of Republican Donald Trump to the White House, backed by Republican majorities in the Senate and likely the House of Representatives. Investors are optimistic that a second Trump presidency will lead to faster earnings growth, deregulation, and lower corporate taxes. The S&P 500 had its best performance in nearly a year, ending the week with a 4.66% gain.
As Trump’s tariff-heavy policies loom, global markets are evaluating the potential impacts on trade dynamics once he takes office in the new year. Although Trump has proposed tariffs as high as 60% on Chinese goods, Chinese markets remained cautious this week. Investors are also considering how high tariffs could affect inflation, which caused U.S. government bond yields to rise on Wednesday. However, expectations of a Federal Reserve rate cut helped bring yields back down by Thursday evening.
In the U.S., the Fed lowered the federal funds target range by 25 basis points to between 4.5% and 4.75%. Federal Reserve Chair Jerome Powell reaffirmed the Fed’s commitment to data-driven decision-making, stating that any future rate adjustments would be evaluated “meeting by meeting.” Powell noted that the U.S. economy remains “strong overall” and emphasized that the election outcome would have “no effect” on near-term decisions, stressing that acting on speculation about policy would be inappropriate.
Across the Atlantic, the Bank of England also cut its base rate by 25 basis points to 4.75%, a move welcomed by mortgage holders. This decision aligns with recent data showing slower inflationary pressure, as UK inflation dropped to a three-year low of 1.7% in September. The Bank’s Monetary Policy Committee (MPC) forecast that the first budget under Chancellor Rachel Reeves could raise inflation by up to half a percentage point over the next two years, which may lead to a slower decline in interest rates than previously expected.
Outside the U.S., market performance was more muted, with both UK and European markets closing the week lower. Investors appeared to be weighing the potential trade impacts of Trump’s re-election while also reacting to China’s stimulus announcement on Friday. The National People’s Congress Standing Committee revealed a 10 trillion-yuan debt package aimed at easing local government financing strains and stabilizing China’s slowing economy. While China’s Finance Minister indicated that more stimulus measures could be on the horizon, some analysts speculate that Beijing may hold off on fully deploying its economic measures until Trump officially takes office in January.