Next week’s Inauguration Day will finally clear up for investors what exactly Donald Trump’s return to the White House means for markets. Last year, in the immediate aftermath of Trump’s November victory, stocks rallied in a so-called “Trump bump” that lifted those parts of the market expected to benefit most from the president-elect’s pro-growth policies and promise to roll back federal regulations. Small-caps spiked. Financial stocks rallied, as did energy. But the market has faded since then. Earlier this month, the S & P 500 nearly erased all its gains since the election, in part because investors worried that Trump’s policies around trade and immigration could reignite inflation and hurt the market more than it would help. .SPX 3M mountain S & P 500 over past three months Now, with the curtain set to rise on Trump’s second act, investors will get confirmation on what the president-elect actually will do in enacting tariffs on imports — and other items on his long list of campaign promises — that will determine what’s next for stocks, and decide which individual securities will prove the biggest winners and losers. “Everything is going to be, in my opinion, driven by what Trump does on Monday,” said Charlie Ashley, portfolio manager at Catalyst Funds. “He’s got apparently 100 executive orders that he plans to sign on Day One,” Ashley continued. “And that, in my opinion, is going to be the biggest market-moving event that’s going to not only impact next week, but the foreseeable future.” On Friday, stocks were on pace for their first winning week in three. As of Thursday, the Dow Jones Industrial Average was set to close out the week higher by nearly 3%. The S & P 500 gained roughly 2%, and the Nasdaq Composite rose about 1%. Next week will be shortened by the Monday holiday to celebrate Martin Luther King Jr. Day. This year, Inauguration Day coincides with MLK Day for the third time ever. Tariffs and inflation Tariffs will be top of mind for investors on Monday, as they seek clarity on just how strictly Trump will adhere to campaign promises that some worry will be inflationary. Ahead of his return to office, the president-elect has already proposed blanket tariffs of 10% to 20% on all imports, and a 25% tariff on goods from Canada and Mexico. He has said he plans to impose a tariff of up to 60% on imports from China. If Trump sticks to a universal tariff, that could hurt a stock market that is counting on corporate earnings growth to drive shares higher in 2025. Increased price pressures would cut into company profits. This week, in fact, stocks rallied after Wednesday’s core inflation data for December came in cooler than expected in a report that showed moderate improvement but was nevertheless encouraging to investors. The S & P 500 had its best day since November. “There’s reason to continue to be optimistic that the market can continue higher,” Ashley said. “The big thing that could derail that is blanket tariffs that cause inflation.” “That would be something that I’m keeping an eye on,” he added. A punishing trade policy could also mean the Federal Reserve is done cutting interest rates, another scenario that is unlikely to be welcomed by markets. At their December meeting, policymakers indicated they would proceed more slowly with interest rate cuts in 2025 than they had expected as recently as last September. Winners and losers Trump’s tariff policy is expected to drive the near-term direction of the wider market, especially helping or hurting those companies with sizable domestic or overseas operations. Small-caps, as represented by the Russell 2000, spiked 4% this week, and are expected to benefit from Trump’s protectionist policies. On the other hand, Apple, whose manufacturing is done overseas, is down more than 2% this week and 8% this year. .RUT YTD mountain Russell 2000 It will also determine the outlooks for other parts of the market. Financial stocks as represented by the SPDR S & P Regional Banking ETF (KRE) rallied more than 6% this week, buoyed by the promise of less regulation and a revival in “risk on” trades. Oil and gas companies, as represented by the VanEck Oil Services ETF (OIH), surged 8% just this week ahead of Inauguration Day. The i Shares U.S. Aerospace & Defense ETF (ITA) jumped more than 4%. Health care stocks could see an outsized impact. Investors will also parse through a number of earnings reports from industrial companies next week. While any potential executive orders from Trump will not have an immediate impact, traders will get some sense on how management is thinking through any policy changes for their companies. Week ahead calendar All times ET. Monday Jan. 20 Inauguration Day Markets closed for MLK Day. Tuesday Jan. 21 Earnings: Seagate Technology , Capital One Financial , Netflix , United Airlines , 3M , KeyCorp , Fifth Third Bancorp , D.R. Horton , Charles Schwab Wednesday Jan. 22 10 a.m. Leading Indicators (December) Earnings: Steel Dynamics , Kinder Morgan , Discover Financial Services, Procter & Gamble , A bbott Laboratories , Johnson & Johnson , Halliburton , GE Vernova Thursday Jan. 23 8:30 a.m. Continuing Jobless Claims (01/11) 8:30 a.m. Initial Claims SA (01/18) 11 a.m. Kansas City Fed Manufacturing Index (January) Earnings: Intuitive Surgical , Texas Instruments , CSX , Freeport-McMoRan , Union Pacific , McCormick & Co., Elevance Health , Northern Trust , GE Aerospace Friday Jan. 24 9:45 a.m. PMI Composite preliminary (January) 9:45 a.m. S & P PMI Manufacturing preliminary (January) 9:45 a.m. S & P PMI Services preliminary (January) 10 a.m. Existing Home Sales (December) 10 a.m. Michigan Sentiment final (January) Earnings: Verizon Communications , American Express
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