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: Stocks Dip but Post a Strong Week After Trump's Return**

**January 24, 2025** – In a classic case of "what a difference a week makes," the U.S. stock market had a confusing but ultimately positive day. On Friday, the S&P 500, a key index that tracks 500 of America's biggest companies, closed slightly down from its all-time high, mainly because technology stocks like Apple and Microsoft didn't perform well.

However, when you zoom out and look at the entire week, the story is much brighter. The S&P 500, along with the tech-heavy Nasdaq and the Dow Jones (which tracks 30 major companies), all posted their biggest weekly gains in months. This surge is largely attributed to the political shift following Donald Trump's return to the White House.

Let's break down what's happening and why it matters.

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

To understand today's market, we need a quick history lesson.

* **The Long Boom (2010-2020s):** For over a decade, the stock market experienced a historic "bull market," meaning prices generally went up for a long time. A huge driver of this was the technology sector. Companies that focused on software, cloud computing, and digital services became some of the most valuable in the world.

* **The Pandemic Rollercoaster:** The COVID-19 pandemic in 2020 caused a sharp crash, but it was followed by an even faster recovery. This was fueled by government stimulus checks and a world suddenly dependent on tech for work, school, and shopping.

* **Inflation and Interest Rates:** As the economy heated up, prices for everyday goods (inflation) rose quickly. To cool things down, the Federal Reserve (the U.S. central bank) began raising interest rates. Higher rates make it more expensive for companies to borrow and grow, which often hurts stock prices, especially for tech companies that rely on borrowing for future expansion.

* **The Political Cycle:** Stock markets have always reacted to presidential elections. Investors try to predict how a new administration's policies on taxes, regulation, and government spending will affect corporate profits.

The event on January 24, 2025, sits at the crossroads of these trends: a market that had been wrestling with high interest rates is now reacting to a significant political change.

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

Most financial experts and everyday investors point to a few key reasons for the strong weekly performance.

* **Expectation of Business-Friendly Policies:** The general view is that a Trump administration will likely focus on policies that are seen as good for business. These include:

* **Lower Taxes:** The possibility of extending or making permanent the tax cuts from his first term. When companies pay less in taxes, they keep more profit, which can make their stocks more attractive.

* **Deregulation:** The expectation of reducing rules on industries like energy and finance. Less regulation can mean lower costs and higher profits for companies in those sectors.

* **Tough Stance on China:** While a trade war can be disruptive, some investors believe a firm approach could benefit certain U.S. manufacturers.

* **A Shift at the Federal Reserve:** There is a widespread belief that the new administration will appoint leaders to the Fed who are more inclined to lower interest rates. For a market that has been held back by high rates, this is like a promise of rain after a long drought.

* **The "Buy the Rumor" Effect:** Often, markets move in anticipation of an event. Investors this week weren't waiting to see the policies in action; they were buying stocks based on the *expectation* of what will happen now that the election is over.

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

Not everyone is celebrating. Many seasoned analysts and economists are urging caution, pointing out several potential pitfalls.

* **Inflation Could Get Worse:** The proposed policies—tax cuts and potentially higher government spending—could pour more fuel on the economy. If the economy runs too hot, it could reignite the very inflation the Fed has been fighting, forcing them to keep interest rates high for longer.

* **Trade Wars are a Double-Edged Sword:** While some companies might benefit from protectionist policies, many others rely on global supply chains. A full-blown trade conflict with China could disrupt production, increase costs for both companies and consumers, and hurt corporate profits.

* **The Tech Slump is a Warning Sign:** The fact that tech stocks slumped on Friday, even during a good week, is a red flag for some. These companies are often seen as the growth engines of the modern economy. If they are struggling, it could signal that underlying issues, like high interest rates, haven't magically disappeared.

* **Markets Hate Uncertainty:** A sudden shift in policy direction creates uncertainty. It takes time for businesses to understand the new rules of the game, and this period of adjustment can lead to volatile and unpredictable markets.

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#### **4. Implications: What We Can Learn From This Week**

The market's behavior this week teaches us several important lessons about investing and the economy.

* **Politics and Markets are Deeply Intertwined:** This week is a clear reminder that who sits in the White House has a direct and immediate impact on Wall Street. Investors cannot afford to ignore politics.

* **Don't Confuse a Short-Term Rally with Long-Term Health:** A big weekly gain feels great, but it doesn't guarantee a smooth ride ahead. The slump in tech stocks on the same day as the weekly gain is a perfect example of the mixed signals markets can send. Sustainable growth is built on strong company fundamentals, not just political optimism.

* **Diversification is Key:** This event highlights why it's dangerous to put all your eggs in one basket. While some sectors (like banks or energy) might surge on new policies, others (like tech) might struggle. A diversified portfolio helps you weather these sector-specific storms.

* **Stay Informed, But Don't Panic:** For the average person, the best strategy is often to stay calm. Markets will always have up and down days based on the news. Making impulsive decisions based on a single day or week is usually a recipe for losses. Focus on your long-term goals.

**The Bottom Line:**

January 24, 2025, was a day that captured the two faces of the stock market: short-term worry (the daily dip in tech) and medium-term hope (the big weekly gain). The market has placed a bet on a new era of economic policy. Whether that bet pays off for everyone, or just for some, is a story that will unfold over the coming months and years.