Stock Market on Jan. 24, 2025: S&P 500 ends below record high as tech slumps, but posts big weekly gain along with Nasdaq and Dow after Trump's return to White House - MarketWatch

Of course. Here is a detailed and insightful article based on your request.

***

### **A Surprising Week on Wall Street: Markets React to a New Political Era**

**January 24, 2025** – In a day of mixed signals, the S&P 500 closed slightly lower, stepping back from the record high it set just a day before. The main culprit was a slump in major technology stocks, which have been market leaders for years.

However, the story of the *week* was entirely different. Despite Friday's dip, all three major indexes—the S&P 500, the Nasdaq, and the Dow Jones—posted their biggest weekly gains in months. This powerful rally was fueled by one major event: the return of Donald J. Trump to the White House.

Let's break down what happened, why, and what it might mean for your wallet.

---

#### **1. Historical Background: From Bull Markets to Political Whiplash**

To understand this week, we have to look at the recent past.

* **The Long Bull Run:** For much of the last decade, the stock market, especially tech giants (often called "Big Tech"), experienced tremendous growth. Low interest rates and a surge in digital services during the pandemic sent their values soaring.

* **The Inflation Challenge:** Starting in 2022, rising inflation became a major problem. To combat it, the Federal Reserve (the US central bank) began aggressively raising interest rates. This made borrowing money more expensive, which typically cools off the economy and can hurt stock prices.

* **The Political Factor:** Markets hate uncertainty. The 2024 election was a major source of that uncertainty. Investors were trying to guess how policies on taxes, regulation, and trade might change depending on the winner.

Donald Trump's presidency from 2017 to 2021 was generally seen as good for stocks. His administration passed large corporate tax cuts and focused on reducing business regulations. His return to power signals a likely return to those policies.

---

#### **2. General Public Opinion: Why the Market Cheered**

Many investors and analysts see Trump's victory as a clear positive for businesses and the stock market. Here’s the common view:

* **Expectation of Tax Cuts:** There is a strong belief that the new administration will push to make the 2017 tax cuts permanent or even introduce new cuts for corporations. This means companies could keep more of their profits, which is good for their stock value.

* **Deregulation Hopes:** The thinking is that a Trump administration will reduce rules and regulations on various industries, particularly energy and finance. Less regulation can mean lower costs and higher profits for companies in those sectors.

* **A "Pro-Business" Stance:** Overall, the sentiment is that the government will be friendlier to corporations, creating an environment where businesses are encouraged to grow and invest.

This optimism is why we saw a "sector rotation" this week. While tech stocks paused, shares of banks, industrial companies, and energy producers surged, driving the overall market to a strong weekly gain.

---

#### **3. Counterarguments: Reasons for Caution**

Not everyone is convinced the rally will last, or that the policies will be purely positive. Here are the main criticisms and concerns:

* **Trade War Risks:** President Trump's first term was marked by trade tensions, particularly with China. Critics worry that a return to tariffs (taxes on imported goods) could disrupt supply chains, increase costs for companies and consumers, and slow down the global economy.

* **Interest Rate Worries:** Big tax cuts and government spending could potentially re-ignite inflation. If that happens, the Federal Reserve might be forced to keep interest rates high for longer, which could eventually hurt economic growth and stock prices.

* **The National Debt:** Large tax cuts without equivalent spending cuts could cause the national debt to balloon further, creating long-term economic risks.

* **Tech Sector Jitters:** The slump in tech stocks on Friday shows that not all sectors benefit equally. Tech companies, which often have vast international operations, could be most vulnerable to new trade wars.

In short, the counterargument is that short-term gains might come with long-term volatility and economic challenges.

---

#### **4. Implications: What This Means for You**

So, what can we learn from this rollercoaster week?

* **Politics Moves Markets:** This week was a perfect example that political events can have an immediate and powerful impact on your investments. It's a reminder to be aware of the political landscape.

* **Diversification is Key:** The fact that some sectors soared while tech dipped highlights the importance of not putting all your eggs in one basket. A diversified portfolio (a mix of different types of stocks and bonds) can help smooth out the ride.

* **Focus on the Long Term:** While weekly swings make headlines, successful investing is usually about the long game. Trying to time the market based on daily news is incredibly difficult. Instead, focus on your long-term financial goals.

* **Stay Informed, Not Reactive:** It's good to understand what's moving the market, but it's rarely a good idea to make rushed investment decisions based on a single week's news. Big political changes take months or years to fully play out in the economy.

**The Bottom Line:**

The market's strong weekly gain reflects hope for a business-friendly future. However, the Friday tech slump is a reminder that hope is mixed with risk. For the average person, the best strategy remains a steady one: stay diversified, focus on your long-term plan, and avoid making big financial decisions based on the day's headlines.