After Donald Trump won the U.S. presidential election, the financial markets reacted extraordinarily well to the news. Investors flocked to sectors most thought would be positively impacted by Trump’s commitment to lower taxes, less regulation, and more effective immigration control.
The main stock indexes rose nearly 5% right after the election but closed a little bit lower a week later as uncertainties of economic policies became more entrenched. While some industries begin to advance, disputes continue over what Trump’s policies will mean for the long run for the United States economy.
One very clear winner is Tesla. Its shares jumped about 35% since election day sent the market value of the company above $1 trillion. What investors see in that: Trump’s administration will be soft on regulating scrutiny of self-driving technologies, which can be an upside for Tesla.
On the other hand, close personal friendship between Elon Musk and Trump may further support the company on several matters of complicated US-China relations, given Tesla’s importance as an earner of electric vehicles for the latter.
Additionally, analysts believe that with a cut in government incentives on electric vehicles, Trump would be making it even more difficult for the competitors to regain lost ground.
Cryptocurrency markets also received a significant jolt, as Bitcoin surged more than 25% to record highs, briefly above $89,000. This rally reflects investor optimism that Trump’s presidency will be favorable to the sector, especially considering his campaign promise to make the U.S. the “crypto capital of the planet.”
Trump’s support for industry-specific regulation and his vow to replace regulatory leaders such as the Securities and Exchange Commission chair could well ease the pressure on crypto firms, which faced heightened scrutiny under the previous administration.
Shares of major U.S. financial institutions rose in double digits with hopes that the new administration will be lenient with regulations. The effects on rules that have to do with cash reserves allocated to banks and anti-monopolistic policies would make them freer to do mergers and acquisitions, which uplift their bottom lines.
The shares of firms like Capital One and Discover, which have mergers under regulatory review, soared by more than 15 percent as the optimism about a friendlier business regulatory environment spread.
Private prison operators GEO Group and CoreCivic saw their stocks surge by about 70% as investors believe that Trump’s promised immigration policies would usher in a stronger flow of government contracts.
With estimates indicating the deportation of millions of immigrants, private prisons stand to gain the most, and there is a likelihood that even if the Justice Department rolls back restrictions imposed on private prison companies, it will particularly support them. This means that this is a policy shift from previous ones where it sets the tone that immigration stands out among the administration’s top concerns.