Wealth management and brokerage firms, including Charles Schwab, Robinhood, and Morgan Stanley, experienced a surge in stock prices on Wednesday following the election of President Donald Trump, which fueled expectations of reduced regulation and a more business-oriented administration.
Robinhood Markets led the market rally, with its stock soaring nearly 20%, pushing its year-to-date gains to 134%. Major players like Interactive Brokers, Morgan Stanley, LPL Financial, Ameriprise Financial, and Stifel Financial all enjoyed double-digit gains. Wells Fargo, known for its substantial wealth management division alongside consumer banking, saw a 13% increase, while Schwab’s stock rose by 6.2%.
Meanwhile, the S&P 500 posted a more moderate 2.5% rise.
Financial stocks broadly rose in response to expectations of a friendlier stance toward Wall Street from the incoming Trump administration. The SPDR S&P Bank ETF, a tracker for financial services firms, jumped nearly 12%.
"Financial services is one of the most impacted sectors by a change in administrations," notes Devin Ryan, an analyst at Citizens JMP Securities. "Key factors are shifts in regulatory policies and tax changes."
Jeff Schulze, head of economic and market strategy at ClearBridge Investments, added that Trump’s pro-business stance could foster a more favorable environment for capital investments. "The potential extension of the Tax Cuts and Jobs Act, alongside lighter regulations, should outweigh risks from increased tariffs and potential immigration restrictions on corporate profits," he explained.
Anticipation of increased mergers and acquisitions activity also boosted investor sentiment, particularly benefiting wealth management firms with investment banking arms, such as Morgan Stanley, Stifel, and Raymond James Financial, whose shares climbed 9.7%.
While control of the House of Representatives remained uncertain, Republicans had secured enough Senate seats to retake control of that chamber by Wednesday morning. This shift could ease Trump’s appointment of officials to government agencies like the Securities and Exchange Commission (SEC), which could impact the regulatory landscape. Trump has expressed intentions to dismiss SEC Chairman Gary Gensler, known for his stringent regulatory approach.
Jeff Schmitt, an analyst at William Blair, pointed out that several wealth management firms, including Wells Fargo and LPL Financial, have disclosed SEC inquiries into cash sweep practices, where client cash is moved into low-yielding accounts. This summer’s regulatory scrutiny had dampened investor confidence. "With a Trump administration, it’s likely this concern will recede, relieving investor worries," Schmitt observed.
Trump’s administration is expected to revisit some of the policies from his first term, such as reversing Department of Labor regulations that expand fiduciary responsibilities for financial advisors. These regulations have drawn criticism from the wealth management sector for being overly burdensome. The Biden administration recently released a final version of its fiduciary rule, which could now face rollback efforts under Trump.
Cryptocurrencies, too, saw gains following Trump’s election win. The campaign saw Trump express support for the crypto industry, driving Ethereum and Dogecoin prices higher, with Bitcoin reaching a new record, briefly surpassing $75,000. Shares in crypto-related stocks, like Coinbase, surged by 31%, benefiting firms like Robinhood, which recently expanded its crypto trading offerings.
"A more lenient regulatory approach is likely to be beneficial for these firms," commented Ryan.
Nonetheless, the outlook for wealth management firms depends on economic conditions and Trump’s policy priorities. "It’s crucial to monitor economic and interest rate developments," said Ryan. "But the current sentiment leans toward lower taxes and deregulation."
