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 Strong Despite a Rocky Day**

**January 24, 2025** – In a classic case of "look at the week, not just the day," the U.S. stock market closed a dramatic Friday with mixed results. The S&P 500 slipped from its record high, pulled down by a sudden slump in major technology companies. However, this small daily drop did little to overshadow a powerful weekly surge that saw all three major indexes—the S&P 500, the Nasdaq, and the Dow Jones—post significant gains.

This remarkable weekly rally has one clear catalyst: the inauguration and policy announcements following the return of former President Donald Trump to the White House.

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

To understand why the market reacted this way, we need to look back.

* **The Long Bull Run:** For years, the market was driven by low interest rates and the explosive growth of big tech companies like Apple, Microsoft, and Google. These "tech giants" became so valuable that their performance could single-handedly push the entire market up or down.

* **The Pandemic and Inflation:** The COVID-19 pandemic caused a sharp crash followed by a huge recovery, fueled by government stimulus money. This spending, however, contributed to the highest inflation rates seen in decades.

* **The Fed's Response:** To fight this inflation, the Federal Reserve (the Fed) began aggressively raising interest rates. This made borrowing money more expensive, which slowed down the economy and put pressure on stock prices, especially for tech companies that rely on borrowing to grow.

* **Political Impact:** Historically, markets have shown a strong tendency to react to political changes, especially those that promise significant shifts in regulation, taxes, and government spending. The uncertainty of an election often leads to market volatility, followed by a strong move once the outcome is clear.

The event of January 20, 2025, fits directly into this pattern, acting as a major shock that changed investors' expectations for the future.

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

The overwhelming opinion among many investors and analysts is that the new administration's stated goals are "market-friendly." The big weekly gain is seen as a vote of confidence from Wall Street. Here’s why:

* **Expectation of Lower Taxes:** Proposals for further corporate tax cuts are seen as a direct boost to company profits. If companies pay less in taxes, they keep more earnings, which makes their stock more valuable.

* **Deregulation Hopes:** The belief that the administration will reduce regulations on industries like energy, finance, and healthcare has led to a surge in those stocks. Less regulation often means lower costs and easier operations for businesses.

* **Tough on China:** A promised tough stance on trade with China is viewed favorably by some investors who believe it will protect American companies and bring manufacturing back to the U.S.

* **A Different Approach to the Fed:** There is speculation that the new administration may pressure the Federal Reserve to lower interest rates more quickly. Since tech stocks suffer when rates are high, the expectation of lower rates fueled the Nasdaq's big weekly jump.

In short, the common view is that these policies will stimulate business growth, lead to higher corporate profits, and make U.S. stocks more attractive.

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

Despite the celebratory mood, many experts are sounding notes of caution. The Friday tech slump, which dragged the S&P 500 down from its peak, is a visible sign of this unease. The opposing views include:

* **Trade War Risks:** While being tough on China might help some companies, it could also start a trade war. Trade wars often lead to higher prices for consumers, disrupted supply chains, and lower profits for companies that rely on international business.

* **Inflation Concerns:** Large tax cuts and government spending could pour more money into an economy that is still sensitive to inflation. This could force the Federal Reserve to *keep* interest rates high for longer, which would ultimately be bad for stocks.

* **Uncertainty and Volatility:** Promised policies are just promises. The process of turning them into law is long, messy, and uncertain. This uncertainty can lead to more wild swings in the market, like the sudden tech sell-off we saw on Friday.

* **The National Debt:** Significant tax cuts without equal cuts in spending could cause the national debt to balloon further, creating long-term economic risks that could haunt the market later.

The critics argue that the market's euphoria might be short-sighted, focusing only on the immediate benefits while ignoring potential long-term problems.

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#### **4. Implications: What This Week Teaches Us**

This rollercoaster week offers several important lessons for everyone, from Wall Street professionals to everyday investors.

* **Don't Overreact to Single Days:** The headline "S&P 500 ends down" tells a very different story than "Market posts big weekly gain." It's a perfect reminder to focus on long-term trends rather than daily market noise.

* **Politics Drives Short-Term Sentiment:** Markets are heavily influenced by the emotions and expectations of investors. A major political event can override other economic data in the short term.

* **The Need for a Balanced Portfolio:** The tech slump on Friday shows that even the strongest sectors can have bad days. This underscores the importance of not putting all your eggs in one basket and diversifying your investments across different industries.

* **The Future is Unwritten:** The market has priced in a "best-case scenario." The real test will be whether the administration can successfully implement its policies without triggering the negative consequences that critics fear. The coming months will be all about watching promises turn into reality.

**The Bottom Line:**

The market ended January 24th taking a brief pause, but it closed a week charged with optimism about a new political era. While hopes for economic growth and business-friendly policies are high, the initial volatility reminds us that the path forward is complex and filled with both opportunity and risk. For now, investors have voted with their dollars, but the final verdict on these policies is still years away.