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: Tech Stumbles, But Markets Still Celebrate**

**January 24, 2025** – In a surprising twist, the U.S. stock market ended a wild week on a quiet note. The S&P 500 closed slightly lower on Friday, stepping back from the record high it hit just a day before. This dip was largely due to a slump in major technology companies. However, this small daily loss hides a bigger story: all three major indexes—the S&P 500, the Nasdaq, and the Dow Jones—posted their biggest weekly gains in months.

This powerful rally was fueled by one major event: the return of Donald Trump to the White House after his inauguration on January 20th. The market’s reaction provides a fascinating snapshot of investor hopes, fears, and expectations for the next four years.

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

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

* **The Pre-2024 Landscape:** For much of the early 2020s, the stock market was dominated by a small group of giant technology companies, often called "The Magnificent Seven." Their incredible growth, driven by artificial intelligence and digital services, powered the market to new heights, even when other parts of the economy struggled.

* **The 2024 Election Cycle:** The entire year of 2024 was marked by extreme uncertainty. Investors had to weigh the policies of two very different candidates. Market performance often swung based on polling data and debate performances, creating a volatile environment.

* **A Known Quantity:** For investors, a Trump presidency is not a complete unknown. His first term (2017-2021) was characterized by significant corporate tax cuts, deregulation (easing business rules), and tough trade negotiations with China. The market performed very strongly during much of that period, until the COVID-19 pandemic caused a historic crash.

Essentially, investors are now looking at the past (Trump's first-term policies) to predict the future, leading to this week's explosive rally.

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

The general feeling among many investors and Wall Street experts is optimistic. This optimism is based on specific expectations for the new administration:

* **Expectation of Tax Cuts:** There is a strong belief that the new administration will push for another round of tax reductions for businesses and individuals. This would leave companies with more profit, which is generally seen as good for stock prices.

* **Deregulation Hopes:** Sectors like energy (especially oil and gas), banking, and healthcare are anticipating a rollback of regulations. Fewer rules can mean lower costs and higher profits for companies in these industries, making them more attractive to investors.

* **Tough-on-China Stance:** While complex, some investors believe a firm approach to trade with China could benefit certain American companies, especially in manufacturing and technology.

* **"Buy the Rumor, Sell the News":** This old Wall Street saying explains this week perfectly. Investors "bought" stocks all week based on the "rumor" or expectation of these business-friendly policies. The slight pullback on Friday represents some investors deciding to "sell the news" and lock in their profits after the big rally.

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

Not everyone is convinced this rally is built on a solid foundation. Several critics and cautious analysts are pointing to potential problems:

* **Inflation Concerns:** The proposed policies, especially large tax cuts combined with government spending, could pour more fuel on the economy. This might force the Federal Reserve to keep interest rates high for longer to fight inflation, which could slow down economic growth and hurt the market later.

* **Trade War Risks:** A full-blown trade war with China could disrupt global supply chains, increase costs for U.S. companies and consumers, and create instability that markets hate.

* **The Deficit Problem:** Large tax cuts without spending cuts could massively increase the U.S. national debt. Over the long term, a soaring debt can create serious economic risks.

* **Why Tech Slumped:** The drop in tech stocks on Friday is itself a counterargument. Some investors are moving money out of expensive tech names and into sectors like energy and banking that might benefit more directly from the new policies. This "sector rotation" shows that the rally is not universal and that winners and losers are already being chosen.

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

The events of this week offer several important lessons for everyone, from Wall Street professionals to everyday investors.

* **Markets Hate Uncertainty:** The end of the election immediately removed a huge cloud of uncertainty. The market's surge shows that investors would rather have a clear direction, even if they don't all agree with it, than not know what’s coming next.

* **Politics and Markets Are Deeply Linked:** It's impossible to separate the two. Government policy on taxes, regulation, and trade directly impacts corporate profits and investor confidence.

* **Don't Confuse a Weekly Rally with a Long-Term Trend:** One week does not make a presidency. The initial excitement will eventually fade, and the market will start judging the administration based on the actual implementation of policies and their real-world results.

* **Lesson for Investors:** The most important takeaway is to stay disciplined. Chasing a hot trend based on headlines can be risky. The best strategy is almost always a long-term one based on your personal financial goals, not the day's political news.

**The Bottom Line:** The week of January 20th, 2025, will be remembered as a period where hope and expectation overcame immediate concerns. The market celebrated the promise of a business-friendly environment, even as it nervously eyed the risks. The true test will be whether the policies that follow can deliver sustainable growth without triggering the negative consequences that critics fear. For now, Wall Street has chosen to see the glass as half full.