US stocks had a fun Thanksgiving as they once again hit a record high on Friday!
What does this mean?
It was the third straight week of gains for stocks in America (tweet this) as investors continue to interpret Donald Trump’s election as positive for the US economy and US companies. Promises of a big government spending program aimed at building infrastructure (e.g. airports, roads and bridges) have investors excited about companies that are geared to that sort of thing (e.g. Caterpillar, which makes construction equipment). Hopes of lower taxes for businesses as well as fewer laws that regulate their activities are also providing fuel for stock prices. These positives have outweighed the possible negative effects on the economy of less immigration and trade (at least, according to the moves in the stock market).
Why should I care?
The bigger picture: Much of the improvement was already happening prior to the election – it’s accelerated since. US stocks have been at record highs for much of the year (since recovering from January/February’s big selloff). There were signs prior to the election that the US economy was picking up steam: the third quarter saw the best economic growth in two years, for example. So while Trump’s expected policies are getting a lot of the credit, it’s worthwhile noting that the tailwinds had already begun prior to the election.
For markets: US-focused companies are doing the best. A measure of smaller companies’ stock prices (called the Russell 2000 Index) has hit a new record high every single trading day since November 14th. Most of these companies are much more domestically focused than the biggest US-based companies (which tend to be multinational, like McDonald’s or JPMorgan). So it’s quite clear that, by buying those US-centric stocks, investors are making a bet that the US economy is going to pick up steam.
Originally posted as part of the Finimize daily email.
The top 2 financial news stories in 3 minutes. Join over 400,000 Finimizers