U.S. stocks finished strong on President Joe Biden’s final full day in the White House as Wall Street embarked upon a new era.
Financial markets enjoyed their best week since November 2024 as rocketing Treasury yields took a breather.
The blue-chip Dow Jones Industrial Average rallied nearly 400 points to end the day at 43,487.43, registering a weekly gain of about 4 percent.
The tech-heavy Nasdaq Composite added more than 300 points to settle the session at 19,630.20. It posted a weekly jump of about 2.5 percent.
The S&P 500 rose 1 percent to 5,996.70, enjoying a weekly boost of 2.9 percent.
Investors have seen monster nominal (non-inflation-adjusted) returns over the past four years.
The New York Stock Exchange has endured various economic and geopolitical headwinds and a 2022 bear market, posting dozens of record finishes last year.
Since Biden’s Inauguration Day on Jan. 20, 2021, the Dow Jones has advanced 40 percent. The Nasdaq increased 49 percent, while the S&P 500 soared 56 percent.
The three-year inflation-adjusted growth rate for the Dow and Nasdaq is 6.3 percent and 9 percent, respectively. The S&P 500’s real return is 8.4 percent.
Traders were relieved to see the yields on U.S. government bonds take a breather this week.
The benchmark 10-year Treasury yield started the trading week at 4.8 percent and fell to 4.61 percent.
Still, yields have spiked more than 100 basis points since September, when the Federal Reserve initiated its easing cycle and followed through with 1 percent interest rate cuts.
With the Fed signaling a pause in rate cuts—and the futures market penciling in the next quarter-point reduction in June—investors have been shifting their policy expectations and anticipating higher for longer interest rates.
Tom Essaye, the president of Sevens Research Report, says investors have been shrugging off economic data outside of inflation reports, emphasizing a focus on interest rates and potential political implications.
“But while those two issues are driving markets right now, whether we keep this soft landing intact or it deteriorates into a hard landing is still the most important medium and long-term question for markets and because of that, we must continue to closely watch economic data,” Essaye said in a note emailed to The Epoch Times.
“Positively, there are virtually no signs in the important economic data that imply the economy is deteriorating.”
Reading Trump 2.0 Tea Leaves
Market watchers forecast more growth ahead for stocks as Biden hands the keys of 1600 Pennsylvania Avenue to Present-elect Donald Trump.Even as Wall Street grapples with rising interest rates and their impact on equities, investors have many reasons to be excited about stocks, says Mike Washington, an equities trader with Goldman Sachs Global Banking & Markets.
“I think, all said and done, we’re looking at another double-digit-return year,” Washington said in a note emailed to The Epoch Times.
David Miller, the senior portfolio manager at Catalyst Funds, has many reasons to be bullish on stocks in the coming year.
One is the profitability of most of the Magnificent 7 in the S&P 500, including Alphabet, Apple, Microsoft, and Nvidia.
“In 2025, the companies dominating the index [S&P 500] are incredibly profitable monopolies,” Miller said in a note emailed to The Epoch Times.
“Monopolies have historically been the best businesses to own and the S&P 500 is now dominated by monopolies.”
“In U.S. equities, notwithstanding fewer likely rate cuts, we see a favorable backdrop ahead—driven by a mixture of lower borrowing costs, resilient U.S. activity, a broadening of U.S. earnings growth, further AI monetization, and the potential for greater capital market activity under a second Trump administration,” the bank said in a report.
Less-than-expected inflation from tariffs, productivity-driven growth, and small business optimism are factors Nancy Tengler, the CEO and CIO of Laffer Tengler Investments, thinks will lead to a strong economic climate.
“It is a good time to be bullish. We expect volatility and our [on average] annual correction during [the] first half of 2025 but Trump 2.0 will ultimately be good for consumers, corporations, and investors,” she said in a note emailed to The Epoch Times.
Jay Woods, the chief global strategist at Freedom Capital Markets, also thinks the stock market will have some hiccups and could be in the early phase of a 10 percent correction.
This will be driven by market rotation, a stringent Federal Reserve policy, and the potential public policy implications stemming from the incoming administration, he noted.
“[It] happens on average every 18 months. Last one, October 2023. It still will not derail the cyclical bull market or my overall bullish take for 2025,” he said.
