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

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### **A Surprising Week on Wall Street: Stocks Dip But Still Score a Major Win**

**January 24, 2025** – In a fitting end to a whirlwind week, the S&P 500 closed slightly lower on Friday, stepping back from the record high it set just a day before. The main reason for the dip was a stumble in the technology sector, with some of the biggest names like Apple and NVIDIA seeing their stock prices pull back.

However, the story of the day is not the small Friday drop. The real story is the massive weekly gain. For the week, all three major indexes—the Dow Jones, the Nasdaq, and the S&P 500—posted impressive gains. This powerful rally was largely triggered by a single, monumental event: the return of Donald J. Trump to the White House.

Let's break down what happened, why it matters, and what people are saying.

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#### **1. Historical Background: From Boom to Bust and Back Again**

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

* **The Pre-2020 Era:** Before the COVID-19 pandemic, the stock market under President Trump was known for its strong performance, fueled by corporate tax cuts and a focus on deregulation (reducing rules on businesses). The market hit many record highs during this period.

* **The Pandemic Rollercoaster (2020-2024):** The pandemic caused a historic crash in early 2020, followed by an even faster recovery. Government stimulus checks and near-zero interest rates poured money into the economy. This era saw a spectacular boom in technology stocks, as life moved online.

* **The Inflation Challenge:** As the economy heated up, inflation soared. To combat it, the Federal Reserve raised interest rates aggressively throughout 2022 and 2023. This made borrowing money more expensive and put pressure on stock prices, especially for tech companies that often rely on borrowing to grow.

* **The 2024 Election:** The election was seen by investors as a major turning point. Markets began to move in anticipation of the policies a new administration might bring.

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

The market's strong weekly performance suggests that a significant portion of investors are optimistic about Trump's return. Here’s why:

* **Expectation of Business-Friendly Policies:** Many investors expect a return to the policies of Trump's first term: lower taxes for corporations and fewer regulations. The belief is that this will allow companies to keep more of their profits and operate more freely, which is good for their stock prices.

* **Hope for Lower Interest Rates:** There is a strong expectation that the new administration will pressure the Federal Reserve to cut interest rates faster. Lower rates make it cheaper for companies to borrow and expand, and they make stocks more attractive compared to savings accounts or bonds.

* **"Certainty" Over "Uncertainty":** Elections create uncertainty. Once the result is clear, even if not everyone agrees with it, markets often rally because they dislike not knowing what will happen. Investors now feel they have a clearer picture of the next four years and can make plans.

In short, the general view is that a Trump presidency will be good for business, and therefore, good for the stock market.

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#### **3. Counterarguments: A Word of Caution**

Not everyone is celebrating, and even optimistic investors are aware of the risks. Here are the main counterarguments and criticisms:

* **Markets Hate Trade Wars:** One of the hallmarks of Trump's first term was imposing tariffs (taxes on imported goods). While intended to help American companies, tariffs often lead to higher prices for consumers and can hurt companies that rely on global supply chains. A new wave of tariffs could spark inflation and slow down the economy.

* **The Rally Might Be Overdone:** Some analysts warn that the market has gotten ahead of itself. It is pricing in the *hope* of perfect outcomes—big tax cuts, no new trade wars, and falling interest rates. If these hopes are not met exactly, a sharp pullback could occur.

* **Long-Term Debt Concerns:** Large tax cuts could significantly increase the U.S. government's debt. While this might boost the market in the short term, high national debt can create long-term economic problems, including the potential for higher inflation.

* **Volatility Ahead:** The tech slump on Friday is a reminder that the market's path is never a straight line up. The coming months will likely be volatile as investors react to each new policy announcement.

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

So, what are the potential outcomes and lessons from this event?

* **Policy is a Powerful Market Driver:** This week proved that government policy can move markets as much, or even more, than company earnings reports. It's a crucial reminder to pay attention to Washington, not just Wall Street.

* **Don't Chase the Headlines:** The biggest lesson for the average person is to avoid making rushed financial decisions based on a single news event. The market's reaction on a given day is often emotional. A long-term investment strategy is almost always wiser than trying to time the market based on politics.

* **Sector Rotation May Continue:** The tech slump on Friday might signal a shift. If policies favor traditional industries like energy, banking, and manufacturing, money might flow out of tech and into those "old economy" stocks for a while.

* **Stay Diversified:** This is the most important takeaway. The future is unpredictable. The best way to protect your savings is to own a mix of different types of investments (stocks, bonds, etc.) across various industries. This way, you are never betting everything on one outcome.

**The Bottom Line:**

The market ended a historic week with a modest pause. While the daily moves make headlines, the smartest investors are looking past the noise, understanding the new political landscape, and ensuring their portfolios are built to handle both the opportunities and the risks that lie ahead.