[ad_1]
Biden’s current market surge marks the second consecutive time that Wall Street has hailed a new president: stocks gained over 6% in the inaugural election after Donald Trump defeated Hillary Clinton in 2016 The market gained 5% in Trump’s premiere. 100 days also.
But there is one major difference: Trump inherited an economy that grew at a steady pace during the long recovery from the Great Recession. Biden enters the Covid-19 economy.
Expectations for a stimulus, combined with Americans starting to receive coronavirus vaccines, have fueled hopes that the economy – and corporate profits – will improve later this year.
Oil, banks and small-cap stocks get bigger boost
To that end, the energy and finance sectors have been the best performers since the election. Oil companies stand to benefit from an improving economy and rising crude prices, while banks often do better when demand for loans increases.
Small-cap stocks also outperformed the S&P 500, which makes sense given that smaller companies have more exposure to the U.S. economy than the large multinationals that dominate the Dow and S&P 500.
Biden’s boost is also in stark contrast to the performance of stocks in the previous two instances where a new president came to power during tumultuous economic times.
The S&P 500 fell more than 6% in late 2000 and early 2001 after George W. Bush defeated Al Gore. This election was also contested, adding to the uncertainty that was already present in the market due to the dot-com bubble burst in early 2000.
And stocks fell nearly 20% from November 2008 to mid-January 2009 after former Biden boss Barack Obama defeated the late John McCain. Investors were still extremely concerned about the collapse of Lehman Brothers and the eruption of high profile bank failures at the time.
But experts say investors need to realize that market performance between the election and the inauguration is not necessarily a harbinger of things to come for the rest of the year.
CFRA Research chief investment strategist Sam Stovall noted in the report that “the S&P 500 is overdue for a digestion of gains that could push the index value below its closing 2020 level.” .
In other words, the rest of the year could be bumpy. But any slowdown could be brief: Stovall also predicted that any market downturn in 2021 would be “settled early enough in the year to allow time to recoup any losses and continue to hit even higher highs.”
[ad_2]
Source link