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: Markets End Mixed After a Political Shake-Up**

**January 24, 2025** – In a week full of twists, the U.S. stock market closed with a mixed but ultimately positive message. On Friday, the S&P 500 dipped slightly, ending just below its all-time high, pulled down by a sudden drop in major technology stocks. However, when looking at the entire week, the story was very different. The S&P 500, the tech-heavy Nasdaq, and the Dow Jones Industrial Average all posted their biggest weekly gains in months.

This rollercoaster week was dominated by one major event: the return of Donald Trump to the White House. Investors and everyday Americans alike are now trying to figure out what this means for their money and the economy.

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

To understand this week, we need to look back a few years.

* **The Pre-2024 Landscape:** The stock market experienced extreme volatility from 2020 to 2023. The COVID-19 pandemic caused a sharp crash, followed by a massive recovery driven by government stimulus and the rise of tech companies. This led to a long bull market where stocks seemed to only go up.

* **The Turning Point (2022-2023):** This boom was interrupted by high inflation. To combat it, the Federal Reserve raised interest rates aggressively. This made borrowing money more expensive, which cooled off the hot economy and caused a significant slump, particularly in technology and growth stocks.

* **The Road to 2025:** As inflation began to ease through 2024, investor confidence slowly returned. Markets started climbing again, setting new records and setting the stage for the eventful week we just witnessed.

The return of a Trump administration represents a known variable for markets. Investors are looking back at his first term (2017-2021), which was marked by major corporate tax cuts and deregulation—policies that were generally viewed as favorable for business and stock prices.

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#### **2. General Public Opinion: Why Many Investors Are Cheering**

Many people on Wall Street and Main Street are optimistic. The common view is that a second Trump term will be good for the stock market. Here’s why:

* **Expectation of Business-Friendly Policies:** There is a strong belief that the new administration will push for lower taxes for companies and individuals. When companies keep more of their profit, their stock can become more valuable.

* **Less Regulation:** The thinking is that with fewer rules on industries like energy, finance, and healthcare, companies can operate more freely, potentially leading to higher profits.

* **Stronger Economic Growth:** Policies aimed at boosting American manufacturing and energy production could lead to faster economic growth, which is almost always good for stocks.

* **The "Certainty" Factor:** After any election, markets often rally simply because the period of uncertainty is over. Investors now feel they have a clearer picture of the next four years and can make decisions based on that.

This widespread optimism is the main reason behind the market’s powerful weekly gain, overshadowing Friday’s small dip.

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

Not everyone is convinced the rally will last. Skeptics and critics point to several potential risks:

* **Trade Wars and Tariffs:** A key part of the platform is putting taxes (tariffs) on imported goods. While intended to help U.S. companies, this could make many everyday products more expensive for consumers, hurt companies that rely on imported parts, and lead to retaliation from other countries, disrupting global trade.

* **Inflation Could Return:** If tariffs make goods more expensive and new government spending boosts the economy too much, it could reverse the progress made on lowering inflation. This might force the Federal Reserve to raise interest rates again, which is typically bad for stocks.

* **The Tech Slump is a Warning:** Friday’s decline in tech stocks, the very companies that led the week’s rally, shows that some investors are already taking profits. They might be thinking, "The good news is already priced in," and are now waiting to see if the promised policies actually become reality and work as intended.

* **Long-Term Deficits:** Large tax cuts without equivalent spending cuts could increase the national debt significantly, creating long-term economic risks that could spook investors later.

In short, the opposing view is that the initial excitement might be overlooking the potential for new economic problems down the road.

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

So, what can we learn from this wild week, and what might happen next?

* **Volatility is Normal:** This week was a perfect reminder that the market doesn't move in a straight line. Even during a strong upward trend, daily dips and sector rotations (like tech falling while other sectors rise) are completely normal.

* **Don't React to Headlines:** The most common mistake an average investor can make is to buy or sell based on a single day's news or a political event. The weekly gain tells a more important story than Friday’s loss.

* **Focus on the Long Term:** Political headlines are noisy, but the long-term health of the stock market is tied to corporate profits and the overall economy. A well-diversified portfolio—spreading your investments across different types of assets—is still the best defense against uncertainty.

* **Wait and See:** The true impact of any administration's policies takes months or years to fully understand and feel in the economy. The initial market reaction is often based on emotion and expectation, not reality.

**The Bottom Line:**

The market ended the week of January 24th on a note of cautious optimism. While a single event sparked a major rally, the slight pullback at the end signals that investors are still thinking carefully. For anyone with a retirement account or investments, the lesson remains the same: stay calm, stick to your long-term plan, and avoid making drastic moves based on the day’s political news. The future, as always, remains unwritten.