Investors are buying the news of Tuesday’s election results as the S&P 500 is almost 5% higher for the week.
As always, there are big winners and big losers when an event as large as this week’s election happen, but three of this week's winners are poised to run higher as investors prepare for the Trump 2.0 Presidency.
Let's take a look at the winners and how three stocks are truly standing above the market.
Looking across the sector landscape, the big winners for the week were the financial and banking stocks.
The positive results after the election reflect investors speculation that President-Elect Trump will push the Fed to lower interest rates as quickly as possible in 2025.
On Thursday, Jerome Powell and the Fed lowered rates by 0.25%, also setting the stage for an additional cut at their next meeting. The Fed Chairman also hinted that the Central Bank may hold off on an additional rate cut at the last meeting of 2024.
On a sidenote, the Powell was asked if he would consider stepping down as Chairman of the Federal Reserve Bank if asked by Trump to do so. Powell’s answer was short and to the point, “no”.
Investors should expect the financials to continue to outpace the market, especially smaller regional banks represented by the Regional Bank ETF (KRE).
The S&P 500’s move is impressive, but a handful of the individual stocks in the S&P 500 made moves of +20% or more. Three of these stocks are set to continue their strong bull run, outpacing the rest of the market.
The financial stocks have some representation on the top 10 list as Discover Financial (DFS) and Synchrony Financial (SYF) both returned 17%.
The credit companies are more likely to benefit from lower interest rates as they focus on some higher risk credit card and loan lending services.
Recent increases in balances and delinquencies in the credit card industry have had some analyst concerned as high interest rates have made it more difficult to reduce higher credit card balances.
Expect this bullish activity to carry those companies higher into 2025.
The top three S&P 500 stocks, in terms of this week’s performance, have strong ties to the Government and can be considered among those likely to benefit from the Trump Administration’s policies.
Under the second Trump presidency, companies like Palantir Technologies (PLTR), Tesla (TSLA), and Axon (AXON) could see varying impacts based on Trump's policies and their industry positioning.
Palantir Technologies is set to benefit from a Trump presidency due to potential increases in defense spending and border security. These are areas where Palantir's data analytics services are extensively used.
The company's history with government contracts under the Trump administration could see renewed favorability, potentially boosting its stock and operational prospects.
Tesla is facing a mixed scenario, but the stock is still likely to post a strong performance.
A likely rollback of EV incentives and lack of support for renewable energy policies will present challenges for Tesla. That said, Tesla could benefit from less stringent regulatory policies, especially around autonomous and electric vehicles.
Trump’s favorable stance towards domestic manufacturing could provide a tailwind for Tesla. Tesla’s significant U.S. manufacturing presence is in line with Trump’s "America First" economic policies. Expect that tariffs will potentially give Tesla an edge over foreign EV manufacturers.
Axon is known for its law enforcement products like Tasers and body cameras.
The company is likely to see increased domestic sales with Trump's strong stance on Law-and-order and immigration reform. Enhanced funding for police departments and a focus on equipping officers could drive growth for Axon’s products and services.
This week’s reaction to the election in these three stocks is likely to be followed by some short-term profit-taking over the next few weeks. Any weakness between now and the end of the year will be viewed as an opportunity for long-term investors to buy the dip.
Wall Street analysts have had relatively low expectations for all three stock, meaning that we’ll start to see analyst upgrades of each stock, driving even more buyers into these names.
Keep the long-term outlook for each of these stocks in mind and consider a buy and hold strategy for each stock.
