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 Slide But Still Score a Big Win**

**January 24, 2025** – In a twist that left many investors scratching their heads, the U.S. stock market had a mixed day but a fantastic week. The S&P 500, a key measure of the overall market, closed slightly down on Friday, pulled lower by a slump in big technology companies. However, when you look at the entire week, all the major indexes—the S&P 500, the tech-heavy Nasdaq, and the Dow Jones Industrial Average—posted their largest weekly gains in months.

This powerful rally was largely triggered by a single, major political event: the return of Donald Trump to the White House after his inauguration on January 20th.

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

To understand why the market reacted this way, we need a little history.

* **The Long Boom:** For years, especially after the 2008 financial crisis, the stock market experienced a historic rise. Low interest rates, technological innovation (like the rise of Apple, Amazon, and Google), and strong corporate profits fueled this "bull market."

* **The Pandemic Rollercoaster:** The COVID-19 pandemic caused a sharp crash in early 2020, but was followed by an even faster recovery, driven by government stimulus and a shift to digital life.

* **The Recent Challenges:** In the years leading up to 2025, markets struggled with high inflation. To combat it, the Federal Reserve (the US central bank) raised interest rates dramatically. Higher rates make it more expensive for companies to borrow and grow, which often cools off the stock market. Investors were worried about a potential recession.

Historically, the stock market has often reacted strongly to presidential elections and new policies, especially when they promise significant changes to taxes and regulation.

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

Many investors and market experts viewed Trump's return positively. The common view is that his administration's expected policies are "business-friendly." Here’s why:

* **Expectation of Lower Taxes:** There is a strong belief that the new administration will push to extend or even expand the tax cuts passed in 2017. Lower taxes mean companies get to keep more of their profits, which can make their stocks more valuable.

* **Less Regulation:** The thinking is that a Trump White House will reduce rules and regulations on businesses, particularly in sectors like energy and finance. This could lower costs for companies and allow them to operate more freely.

* **Pro-Business Energy Policy:** Policies expected to favor oil, gas, and other traditional energy companies led to a big rally in those stocks, which helped lift the Dow Jones index.

* **A Hope for Lower Rates:** Investors are betting that the administration's policies could help finally tame inflation for good, allowing the Federal Reserve to cut interest rates sooner. Lower rates are like rocket fuel for the stock market.

Essentially, the majority opinion on Wall Street this week was one of optimism, betting that the new political landscape will create a better environment for companies to make money.

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

Despite the week's gains, not everyone is convinced this rally will last. Several critics and cautious investors point to potential problems:

* **Trade War Risks:** One of the biggest concerns is a return to the trade wars seen during Trump's first term. New taxes (called tariffs) on imports from countries like China could raise costs for U.S. companies and consumers, hurting profits and sparking inflation again.

* **The National Debt:** Large tax cuts without spending cuts could cause the already massive U.S. national debt to balloon further. This could worry investors in U.S. government bonds and create long-term economic instability.

* **Market Overreaction:** Some analysts believe the market is getting ahead of itself. They argue that investors are buying on the *promise* of policies that may take a long time to pass through Congress, or might not happen at all. This is often called a "sugar rush" of optimism that can fade quickly.

* **The Tech Slump:** The fact that technology stocks fell on Friday, even on a good week, shows that not all sectors benefit equally from this new outlook. Tech companies, which often rely on global supply chains, are particularly vulnerable to trade tensions.

The counterargument boils down to this: the policies that excite investors in the short term could create significant risks and problems in the long term.

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

The events of this week teach us several important lessons about the stock market and investing:

* **Politics Moves Markets:** This week was a clear reminder that government policy is a major driver of stock prices. Elections and political shifts have real consequences for investment portfolios.

* **Don't React to Daily Noise:** The most important lesson is to look at the bigger picture. The market had a down *day* but a great *week*. Investors who panic-sold on Friday's dip would have missed the huge weekly gain. Short-term moves are often just noise.

* **Diversification is Key:** The slump in tech stocks while other sectors rallied shows why it's dangerous to put all your eggs in one basket. A diversified portfolio (a mix of different types of stocks and bonds) helps protect you when one part of the market stumbles.

* **Expect Volatility:** The mix of optimism and caution means we should expect the market to be jumpy. Big ups and downs will likely continue as investors debate whether the new policies will help or hurt the economy in the long run.

**The Bottom Line:**

The market's reaction to the new administration is a bet on growth. Investors are betting that lower taxes and fewer rules will lead to a stronger economy. However, it's a bet that comes with risks. For the average person, the best strategy remains a timeless one: focus on your long-term goals, don't make impulsive decisions based on the news of the day, and maintain a diversified investment plan.