Donald Trump has won the presidential race.
The S&P 500 surged 2% almost immediately following the election results, marking the beginning of significant shifts across market.
This market reaction follows a predictable pattern though.
During presidential election years, markets typically decline in the weeks leading up to the election, bottom out the day before, and surge during and after the results.
Heading into elections, investors face uncertainty, which is usually a drag on the S&P 500.
Post-election, however, confidence returns, leading to a positive market effect.
This year has played out exactly according to this historical script.
The extraordinary 2% move likely stems directly from Trump’s victory and his promised corporate tax cuts.
Lower taxes mean reduced business costs, leading to increased profit margins and higher company earnings – factors that are bullish for the market.
From a technical perspective, the S&P 500 has shown promising movement.
After breaking below its support line before the election, the market has now rallied back above this crucial level, regaining important technical ground.
The current price channel we’ve been monitoring at Bravos Research suggests potential for continued upside.
The key will be whether the market maintains its position above the recently reclaimed support line.
Ready to Profit From This Market?
At Bravos Research, we’ve capitalized on these market moves with precision.
We initiated trades like $IWM and Bitcoin that are already up 10% and 19.5% respectively.
Our 2024 Performance:
- Over 80 closed trades
- Multiple positions yielding 30-60% gains
- Most losing trades contained under 5%
Want to get real-time Trade Alerts?
Click here to join Bravos Research
Inflation Outlook Remains Favorable
One key inter-market factor we’ve been closely watching is oil.
Oil prices have remained low even after Trump’s win – a crucial factor supporting our bullish market stance.
While tax cuts typically suggest higher growth and potential inflation, current commodity trends tell a different story.
Our proprietary commodity basket, tracking essential raw materials like oil, wheat, cotton, natural gas, and copper, shows a steady 2-year decline in prices, continuing even after Trump’s victory.
US inflation shows a clear correlation to this basket and it currently signals that inflation is likely to remain low.
Since mid-2022, we’ve witnessed steady disinflation, which has fueled the stock market’s rise.
The June inflation peak preceded a market bottom just months later.
This relationship between inflation and market trends remains crucial for future market direction.
Given current commodity prices, we expect disinflation to continue.
This should support the stock market’s bull run at least until a recession materializes.
Trump’s win could mean tax cuts for corporate America without triggering significant inflation at least for now.
That’s why we’re exposed to the Small Caps index ($IWM).
The IWM index, representing about 2,000 small-cap companies, has exploded higher with a 6% jump following Trump’s victory.
These smaller companies offer particularly attractive valuations relative to large caps:
- Large-cap stocks average PE ratio: 22
- Small-cap stocks average PE ratio: 15
This is the widest valuation gap since 1999, presenting a significant opportunity.
Will This Rally Last?
In November 2016, when Trump began his first term, small-cap stocks surged 20% as markets priced in corporate tax cut effects.
Similar to 2016, we anticipate a short-term market boost.
However, whether this becomes a broader bull market depends on economic resilience.
Unlike 2016, the economy faces different challenges today.
For instance, in 2016 job openings were rising, signaling a strong economy.
Today, job market have been steadily declining.
Whether Trump’s policies can reverse this trend remains to be seen.
But, broader economic forces point toward an eventual recession.
We maintain a constructive market outlook through year-end.
At Bravos Research, we’ve made some incredible trades throughout this bull market:
- Average profit in 2024 = 17.37%
- Average loss in 2024 = 3.78%
We send buy and sell alerts on individual stocks, ETFs, crypto, and commodities.
Get access to real-time Trade Alerts here
Subscribe to our YouTube for more in-depth analysis and Follow us on X for real-time market updates!
Read more: This Is a Massive Opportunity on Stocks
