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 Day of Mixed Signals: Markets Pause After a Big Week of Gains**

**January 24, 2025** – The U.S. stock market took a breather on Friday. After a powerful rally earlier in the week, the S&P 500 closed slightly down, ending just below its all-time high. The main reason? A stumble in the technology sector, which has been a market leader for years.

Despite the quiet end to the week, the overall picture was very positive. All three major indexes—the Dow Jones, the S&P 500, and the tech-heavy Nasdaq—recorded significant gains for the week. This surge was largely fueled by the political event that dominated headlines: the return of Donald Trump to the White House.

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

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

* **The Long Boom:** For much of the late 2010s and early 2020s, the stock market experienced a historic bull run, powered heavily by giant technology companies like Apple, Microsoft, and Amazon. Low interest rates made investing in these growth companies very attractive.

* **A Period of Volatility:** The market faced major tests, including the COVID-19 pandemic crash and rapid recovery, followed by a tough period of high inflation and rising interest rates starting in 2022. This hit tech stocks especially hard, as higher rates make their future profits less valuable today.

* **The Election Cycle:** Stock markets have always reacted to presidential elections. Investors try to predict how a new administration's policies on taxes, spending, and regulation will affect different parts of the economy. The 2024 election was watched closely for clues on what was to come.

This week's activity is a classic example of the market digesting a major political event and adjusting its expectations for the future.

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

The strong weekly gain suggests that a large portion of the market views the new political landscape favorably. The common optimistic views include:

* **Expectation of Business-Friendly Policies:** Many investors believe the new administration will focus on reducing regulations for companies, particularly in sectors like energy and finance. The idea is that less red tape can mean higher profits.

* **Anticipation of Tax Cuts:** There is widespread speculation about potential new tax cuts, especially for corporations and high earners. If companies get to keep more of their money, they might invest more, hire more, and see their stock prices rise.

* **A Focus on Domestic Energy:** Policies expected to encourage U.S. oil and gas production can help keep energy prices low, which is good for many businesses and consumers.

* **A "Wait-and-See" on Trade:** While trade wars with China were a concern during the previous administration, some investors are hopeful that any new policies will ultimately strengthen the U.S. position.

In short, the prevailing mood among many is one of optimism for economic growth and corporate profits.

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#### **3. Counterarguments: The Other Side of the Coin**

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

* **Inflation Concerns:** The very policies that might boost growth—like tax cuts and government spending—could also pour more fuel on the economy's fire. If demand grows too fast, it could reignite inflation, forcing the Federal Reserve to raise interest rates again, which would hurt stocks.

* **The Threat of Trade Wars:** If the administration follows through on threats of high tariffs on goods from China and other countries, it could make products more expensive for American consumers and disrupt supply chains for companies, hurting their profits.

* **Market Overconfidence:** Some analysts worry the market is getting ahead of itself. Stocks have risen very fast on hopes and promises, not yet on concrete policy or real economic results. This can lead to a sharp pullback if reality doesn't meet expectations.

* **Why Tech Slumped:** The dip in tech stocks on Friday is a warning sign. Tech companies often rely on global supply chains and consumer spending. If trade tensions rise or economic policies lead to uncertainty, these sensitive stocks can be the first to fall.

The fear is that short-term gains could be overshadowed by long-term economic challenges.

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#### **4. Implications: What This All Means for the Future**

This week offers several important lessons for investors and everyday observers:

* **Politics Moves Markets, But Fundamentals Matter in the Long Run:** While elections cause immediate reactions, the market's long-term health will ultimately depend on hard data: corporate earnings, employment numbers, and inflation rates. Don't get swept away by daily political headlines.

* **Diversification is Key:** The fact that tech stocks fell while other sectors held steady is a perfect reminder. Don't put all your eggs in one basket. A diversified portfolio can help you weather volatility in any single part of the market.

* **Expect Continued Volatility:** The market hates uncertainty. As the new administration unveils its specific policies, the market is likely to swing up and down as it figures out what each change truly means.

* **For the Everyday Person:** Most people shouldn't try to time the market based on political news. A steady, long-term investment strategy based on your personal goals is almost always a wiser approach than reacting to the news of the day.

**The Bottom Line:** January 24th was a day of pause, but it capped a week where Wall Street made a big bet on a new political era. Whether that bet pays off will depend not on headlines, but on how policies translate into real economic growth and stability for all Americans.