(Yahoo! Finance) - A decisive win for Donald Trump eliminated any uncertainty around the results of the 2024 presidential election.
But what Trump's second term means for investors is still up for debate.
"We think it’s fair to say that the US equity market is in a discovery process regarding the domestic policy platform of the new administration and that the political backdrop presents tailwinds and potential headwinds for stocks in the year ahead," RBC Capital Markets head of US equity strategy Lori Calvasina wrote in a 2025 outlook research note on Monday.
Market action since Trump won the election on Nov 6. bears this out.
The S&P 500 (^GSPC) soared 2.5% on the day after Trump's victory. Since then, the benchmark index has risen less than 1%. At one point, the S&P 500 had given back all of its post-election bump before rallying higher once more.
Small caps, a popular Trump trade, surged after the election, with the Russell 2000 Index (^RUT) rising about 9% in the immediate aftermath. Then the trade reversed, with the index giving back over half its gains. Another swing saw the Russell 2000 hit a record intraday high on Monday.
As Calvasina wrote: "Right now we simply don’t know what the new administration will do in regard to their campaign promises, or the extent to which they will do them, adding to the fog."
Another pillar of the Trump trade saw long-term Treasury yields rise, with investors fearing new tariffs would push inflation higher. News late Friday that the president-elect would nominate Scott Bessent to be the next Treasury secretary calmed some nerves, bringing the 10-year yield roughly back to where it stood on Election Day.
In a note to clients on Monday, Capital Economics chief North America economist Paul Ashworth cautioned against reading too much into Trump's Cabinet picks given "uncertainty surrounding what policies president-elect Donald Trump will enact during his second term."
Ashworth's comments get to the root of the market's issues right now: At the end of the day, campaign promises are just that, promises.
During Trump's first term in office, nearly half of the 15 people he initially appointed to lead the executive departments were gone halfway through his presidency.
In a note Monday issuing his 2025 year-end S&P 500 forecast of 6,600, Barclays head of US equity strategy Venu Krishna opted not to include any impacts on how US policy shifts could impact earnings or valuations due to the "fluidity of the Trump 2.0 policy outlook."
"[There] is a temptation to read a lot into [Trump's] Cabinet nominations, but we would caution against that," Capital Economics' Ashworth wrote.
"Following his comprehensive election victory this is Trump’s world, while the rest of us, including his cabinet, just live in it."
By Josh Schafer - Reporter
