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The results of the recent election are settled, with President Donald Trump securing a second term in office. At Sapient, our focus remains on evaluating how such political developments may impact markets and your investment portfolio going forward. The President’s re-election, coupled with a "red wave" – Republicans maintaining control of the House and regaining the Senate – creates a strong platform for advancing key policy initiatives. In the days following the election, the S&P 500, Dow, NASDAQ,and Russell 2000 indexes all hit new record highs, posting their largest-everpost-election gains.1 This was notable even though U.S. markets tend to perform well in the year following an election, irrespective of the winning party.2
Unified Republican control of Congress and the White House could bring a renewed focus on deregulation, tax reforms, and fiscal policies aimed at growth. Key initiatives may include additional tax cuts or extensions, business-friendly legislative reforms, and expanded domestic energy production.These measures could provide economic stimulus, particularly in sectors like energy, financials, and technology.3
However, certain challenges remain. Rising deficits – approaching $2 trillion annually4 and $36 trillion in aggregate5 – could pressure interest rates higher, increasing borrowing costs and potentially slowing broader economic activity. Tighter trade policies and immigration laws may also add inflationary pressures. While the Trump Administration anticipates its pro-growth policies will mitigate these risks,6 historical data suggests that divided government, rather than unified control, has often been more favorable for markets and economic stability.7
Markets have historically demonstrated resilience during political transitions. While short-term volatility may arise, we continue to emphasize disciplined investment strategies rooted in diversification and long-term goals. These periods of change often create opportunities alongside risks, and our investment decisions remain guided by risk management and fundamentals – earnings, valuations, and economic trends – rather than reacting to headlines.
As we approach year-end, we do not anticipate significant changes to portfolio allocations, though we are reassessing what level of exposure to international equity markets we believe is appropriate for the next market cycle. We remain dedicated to helping navigate these times with unwavering diligence and care.
Sources:
1. Advisorpedia, November 13, 2024, https://www.advisorpedia.com/strategists/post-election-market-wins-what-unified-control-means-for-investors/
2. Capital Group, October 24, 2024, https://www.capitalgroup.com/advisor/insights/articles/what-expect-between-election-day-inauguration.html
3. Goldman Sachs, November 8, 2024, https://www.goldmansachs.com/insights/articles/how-trumps-election-is-forecast-to-affect-us-stocks
4. Treasury.Gov, Fiscal Data “National Deficit”, November 2024, https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/
5. Treasury.Gov, Fiscal Data “Debt to the Penny,” November 2024, https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/debt-to-the-penny
6. Yardeni Research, “Trumped,” November 18, 2024
7. Capital Group, November 7, 2024 https://www.capitalgroup.com/advisor/insights/articles/trump-victory-signals-major-policy-shifts-ahead.html
Although the statements of fact and data in this report have been obtained from, and are based upon, sources that the firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. All opinions included in this report constitutes the Firm’s judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results. Indexes, such as the S&P 500 Index, are not directly investable.
