The DOW Leads US Indices Higher Post-Election

Key Points

• Election uncertainty is gone, and bidders are pounding US stocks.
• 45,000 is in view for the Dow Jones Industrial Average (DJIA).
• The Fed is now second-guessing its 2025 projections.

Market Overview

Uncertainty is a big deal in the markets. It drives angst and paranoia, two emotions that prompt selling. Anytime uncertainty subsides, bidders become active. That’s what has happened this week — the US election is final, and the past 12 months of uncertainty are over. Now, buyers are dominating the US indices, especially the Dow Jones Industrial Average (DJIA).

A Landslide Victory

In politics, the term “landslide” is often used but rarely witnessed. It means an undeniable win, free of dispute. Tuesday, 5 November, brought a landslide Republican victory that delivered the Presidency and a Senatorial majority. 

The final results of Election 2024 are undeniable: Trump easily won the necessary 270 electoral votes and the Popular Vote. The Republicans gained four Senate seats, securing a majority. As of this writing, the Republicans hold a lead in the House of Representatives and expect to win the majority upon several races being called. Polymarket currently assigns a 98% chance of a Republican majority in the House of Representatives for the 2025-27 term.

Ultimately, this was a definitive election. Many analysts and political pundits expected the 2024 political season to be decided in a courtroom. The markets did as well. Safe haven assets posted big gains in the run-up to the election, led by gold, silver, and the Swiss franc. Stocks and crypto remained bullish, but traded largely sideways. 

Now, the shoe is on the other foot: stocks and crypto are up huge, while safe havens lag.

DJIA (US30): Technical Outlook

Wednesday, 6 November 2024, the US30 spiked by an astonishing 3.56%. Bidders entered the market enthusiastically following the uncontested landslide election. 

A few observations jump off the daily US30 chart. First, the enormity of the 6 November candle is striking. It marked the largest one-day gain since 2020. Second, the key number of 45,000 is within striking distance. This is a likely destination for the US30 and may be a great short-scalping opportunity in the near future.

For now, buying pullbacks is a solid way of approaching the US indices. US30 bids from the 43,150 area are tough to argue with. If a selloff does develop early next week, this zone should draw heavy buying.

The Fed Speaks! A Cautionary Tale?

Thursday brought the latest installment from Jerome Powell and the United States Federal Reserve. To no one’s surprise, the Fed cut interest rates by ¼ point and continued to reduce their balance sheet. 

The real story was the tone in the room. Media members asked Powell repeatedly about the election’s result and if it would impact Fed policy. “No” was the word of the day, with Powell reiterating that Trump could not fire him and that he would not step down if asked. 

By far, the most important question faced forward guidance. In short, the Fed’s stance remains data-dependent. Powell alluded to the uncertainty of future legislation regarding tax cuts and tariffs, essentially saying that the Fed would adjust policy after such events occurred:

“We don’t know the timing and substance of what any policy changes will be. We therefore don’t know what the effects on the economy would be, specifically, whether and to what extent those policies would matter for the achievement of our goal variables, maximum employment and price stability.”

Powell went on to say:

“In principle, it’s possible that any administration’s policies could have economic effects over time that would matter for our pursuit of our mandate goals. So, we, along with countless other factors, forecast of those economic effects would be included in our models of the economy and would be taken into account.”

Here’s the bottom line: the Trump administration’s stated policies have the Fed rethinking their planned rate cuts for 2025. 

If you’re trading equities, hold on; 2025 is the year when tariffs, tax cuts, and interest rates will collide. Volatility is guaranteed as the post-COVID rally in stocks is set up for a challenge. Get out the popcorn and buckle up — fresh uncertainty just entered the room.