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: The Stock Market on January 24, 2025**

January 24, 2025, was a day that captured the complex and often contradictory nature of the stock market. Headlines announced that the S&P 500 had closed down, ending a streak of record highs, primarily because major technology companies saw their stock prices fall. However, the bigger story was in the weekly gains: despite the daily dip, the S&P 500, the Nasdaq, and the Dow Jones Industrial Average all posted their best weekly performances in months.

This surge was widely attributed to the political shockwave of Donald Trump's return to the White House after the January 20th inauguration. Let's break down what happened, why, and what it might mean for the future.

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#### **1. Historical Background: The Rollercoaster of Politics and Markets**

To understand this day, we need to look back at the relationship between the presidency and the markets.

* **The Trump First Term (2017-2021):** Markets initially soared during Trump's first term. His administration passed significant corporate tax cuts, which boosted company profits and stock prices. However, his presidency was also marked by high volatility, driven by trade wars with China and intense reactions to his statements on social media.

* **The Post-Trump Era (2021-2024):** The following administration focused on different priorities, including large-scale infrastructure spending and tighter regulations in certain sectors. The market faced different challenges: high inflation, rapid interest rate hikes by the Federal Reserve, and a tech sector slowdown after the pandemic boom.

* **The 2024 Election:** The election was a major source of uncertainty for investors. Markets don't like uncertainty, and many investors held back, waiting to see the outcome before making big moves. Trump's victory removed that immediate uncertainty and triggered a massive repositioning based on expectations of his policies.

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#### **2. General Public Opinion: Why the Market Reacted Positively**

The overwhelming view on January 24th was that the weekly rally was a direct bet on the economic policies expected from the new administration. Most commentators and investors pointed to a few key expectations:

* **Expectation of Deregulation:** Many believed a Trump administration would reduce regulations on industries like energy (oil and gas), banking, and healthcare. Less regulation often means lower costs and higher profits for companies, making them more valuable to investors.

* **Anticipation of Tax Cuts:** There was strong speculation about new tax cuts, particularly extensions of the 2017 tax laws that were set to expire. This would leave more money in the hands of businesses and consumers, potentially fueling economic growth.

* **A "Pro-Business" Stance:** The general feeling was that the White House would be more friendly to large corporations, creating a environment considered favorable for business expansion and investment.

This "sugar rush" of optimism is why the markets had such a strong week, even if they took a small breather on Friday as some investors decided to cash in their recent profits.

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

While the weekly rally was dramatic, not everyone was convinced it was sustainable. Several critical voices offered counterarguments:

* **Markets Got Ahead of Themselves:** The most common criticism was that investors were buying on *expectations*, not reality. The policies of tax cuts and deregulation had not yet been passed by Congress. The rally was based on hope, which can be risky if that hope isn't fulfilled.

* **Potential for Higher Inflation:** The 2017 tax cuts were followed by a significant increase in the U.S. deficit. More tax cuts and government spending could potentially re-ignite inflation, which had only recently been brought under control. This could force the Federal Reserve to raise interest rates again, which is typically bad for stock prices.

* **The Risk of Trade Wars:** A hallmark of the first Trump term was aggressive tariffs and trade disputes. If a new administration pursued similar policies, it could disrupt global supply chains, increase costs for companies and consumers, and hurt the stock market in the long run.

* **The Tech Slump is a Warning:** The fact that tech stocks—the market's leaders for years—were slumping even on a up week signaled that the benefits might not be evenly distributed. Tech companies, which often rely on a globalized world, might be more vulnerable to new trade policies.

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#### **4. Implications: Lessons for the Everyday Investor**

The events of this week teach us several crucial lessons about investing and the market's relationship with politics.

* **Short-Term vs. Long-Term:** This day was a perfect example of these two forces. The **short-term** story was a daily drop in tech stocks. The **long-term** story (for the week) was a huge rally based on a major political shift. Smart investors focus on long-term trends rather than daily headlines.

* **Don't Bet Everything on Politics:** While elections have consequences, tying your entire investment strategy to a single political outcome is extremely risky. Policies change, Congress can block plans, and global events can interfere. A diversified portfolio is the best defense against political uncertainty.

* **The Market is a Discounting Machine:** The stock market doesn't react to what is happening *now*; it reacts to what it *expects to happen* in the future. The rally wasn't about policies enacted, but about policies investors believed were coming. This means the market can often be driven by emotion and sentiment, not just cold, hard facts.

**The Bottom Line:**

January 24, 2025, wasn't about a single day of trading. It was about the market taking a deep breath after a major event and making a big bet on the future. The following weeks and months will determine whether that bet was wise or whether it was a classic case of "buy the rumor, sell the news." For the average person, the lesson is to stay calm, stick to a plan, and remember that the market's daily drama is often just noise in a much longer story.