A wave of green, not red, swept through U.S. stock markets on Monday as investors bet that former President Donald Trump would not only win the White House in November but also take control of Congress, analysts said.
After President Trump survived an assassination attempt at a weekend rally, the Dow Jones Industrial Average closed at a record high of 40,211.72 and the S&P 500 hit an all-time high of 5,666.94 during trading hours. Analysts said the assassination attempt gave Trump strong momentum heading into Monday’s Republican National Convention in Milwaukee, Wisconsin, which is spilling over into hopes that Republicans can win in Congress.
If Republicans control the White House and both houses of Congress, they say, it could make it easier for them to pass “business-friendly” legislation. When companies are doing well, their stock prices typically rise.
“Before the weekend, the market was already thinking a Trump victory was likely, but the whole ‘red wave’ scenario wasn’t my base case,” said Ed Moya, an independent stock market analyst. “We’re now seeing momentum building.”
What does the red wave mean for companies (and stocks)?
- Deregulation. “We’re getting a glimpse into how market participants want to portray a Trump presidency, and the outcome will clearly be positive for U.S. equities. In particular, the promise of industry deregulation will be a big positive,” said Chris Weston, head of research at trading platform Pepperstone.
- Tax cuts. The last major tax bill by the Trump Administration was the Trump Tax Cuts and Jobs Act of 2017 (TCJA), which reduced the top marginal corporate tax rate from 35% to 21% and expanded the business investment deduction.
“Without Congress’s action, even more TCJA provisions will expire at the end of 2025, with severe adverse effects for individuals and businesses of all sizes,” the U.S. Chamber of Commerce said.
But critics warn that extending the TCJA tax cuts would lead to a sharp increase in the budget deficit, which is widely seen as bad for the economy and American consumers.
The nonpartisan, nonprofit Center for a Responsible Federal Budget noted that extending nearly all of the expired, expiring or scheduled tax measures would increase the deficit by $5.2 trillion through fiscal year 2035, up from $4.7 trillion under previous legislation ($6.1 trillion including interest).
“Given the enormous costs, policymakers should not deficit-finance all or any part of the TCJA,” the report said.
How real is the red wave?
With Trump’s support growing in the polls, “it’s undeniable that Republicans are heavily leaning to take both the White House and the Senate, but they’re also likely to take the House, something that seemed unlikely a few weeks ago,” Weston said.
But “a lot can still happen between now and November,” Moya said. “Given the ages of both candidates, we could end up with two different people running for president by November.”
Will stock prices continue to rise under Trump’s leadership?
“The market is driven by emotions,” said Matt Chance, a certified financial planner in Florida. “When there’s an assassination attempt, it always favors the person who’s being targeted.”
After John Hinckley Jr. attempted to assassinate President Ronald Reagan in 1981, his approval rating jumped about 10 points.
But such spikes are not a reliable long-term indicator for the stock market.
“I have no idea how people are going to feel next week,” he said. “What happened today is not going to lead to stocks continuing to soar in the next four months. There will be ups and downs along the way.”
Trump Media stock soars:DJT shares surge after assassination attempt on President Trump
What else could boost the stock market?
Analysts said stocks may continue to rise, but that will likely be driven by expectations of lower inflation, a slowing economy and interest rate cuts, rather than President Trump.
“If these trends continue and we are correct that the (Fed) will begin easing in September, that will continue to matter more to market participants than the ups and downs of the election campaign,” said Jonas Golterman, deputy chief market economist at research firm Capital Economics.
Moya said strong corporate earnings should also boost stocks. Big banks including Goldman Sachs, Citigroup and JPMorgan have reported strong profits, and companies are just starting to report second-quarter results. Artificial intelligence stocks will be key, he said.
“A lot will depend on how the AI deal holds up,” he said. “Higher earnings in key semiconductors will give a clearer picture of whether the momentum can be sustained.”
Semiconductor stocks in the spotlight include Nvidia and Advanced Micro Devices.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Contact her at mjlee@usatoday.com. You can also subscribe to our free Daily Money newsletter, which delivers personal finance tips and business news every Monday-Friday morning.
