As Donald Trump prepares to take office for his second term as President of the United States, markets are already reacting to the anticipated economic and political shifts his administration may bring. Investors are gearing up for what many are calling “Trump 2.0,” with a mix of optimism, caution, and curiosity about the policies the new administration will prioritize.
Markets End the Week on a High Note
U.S. markets closed last week on a positive trajectory, marking their first weekly gain in 2025. The S&P 500 climbed 2.9%, while the Dow Jones Industrial Average surged 3.7%, and the Nasdaq Composite added 2.5%. These gains represent the best weekly performance for U.S. stocks since last November’s presidential election.
Banks played a crucial role in driving the rally. Strong earnings from major institutions like Goldman Sachs and JPMorgan Chase boosted investor confidence. Shares of Goldman Sachs increased by 12% last week, while JPMorgan Chase saw an 8% rise. Overall, the financial sector outperformed, gaining more than 6% in the same period.
Chris Senyek, chief investment strategist at Wolfe Research, noted that the financial sector could continue to benefit under Trump’s administration due to potential tax cuts, deregulation, and increased business confidence.
Trump 2.0: What’s at Stake?
While Trump has yet to officially take office, his agenda is already influencing investor sentiment. Analysts are closely watching his first executive orders, particularly those related to tariffs, corporate regulation, and tax policy. These decisions could set the tone for markets in the coming months and determine whether Trump’s second term will usher in the same level of market volatility and opportunity as his first.
Notably, the S&P 500, which initially surged above 6,000 following Trump’s re-election, has since returned to pre-election levels. However, signs suggest investors are preparing to adjust their strategies in anticipation of his policy moves.
China’s Yuan and Trade Relations
Trump’s return to the White House comes at a time when U.S.-China relations remain strained. Beijing has prioritized stabilizing the yuan, which has weakened over 3% against the U.S. dollar in recent months. While a cheaper yuan benefits Chinese exporters, Beijing appears more focused on avoiding currency volatility. Meanwhile, Chinese investment in the U.S. has slowed dramatically, dropping from $46.86 billion in 2017 to just $1.66 billion in 2023. Analysts predict this trend will persist under Trump’s administration, given the “ideological mismatch” between the two nations.
TikTok and the Tech Sector
TikTok also made headlines as the popular social media platform announced it is restoring its U.S. services. This follows Trump’s statement on Truth Social that he would issue an executive order to delay a potential ban on the app. Interestingly, Perplexity AI has submitted a bid to ByteDance, TikTok’s parent company, to form a new entity combining TikTok U.S. with additional capital partners. This development highlights the broader challenges and opportunities tech companies face under Trump’s administration, especially concerning regulation and foreign ownership.
The Rise of Trillionaires?
Wealth inequality is also under the spotlight. Oxfam reported that the combined wealth of billionaires surged to $15 trillion in 2024, up from $13 trillion the previous year. The organization predicts that at least five individuals could achieve trillionaire status within the next decade, underscoring the accelerating concentration of wealth among the world’s richest.
The Bottom Line
Trump’s second term brings both familiarity and uncertainty. With markets already pricing in potential policy shifts, investors are cautiously optimistic. Financials are expected to benefit the most from Trump’s agenda, while other sectors remain watchful of potential regulatory changes. The muted inflation readings for December have also helped revive the “Goldilocks” narrative for equities, with all sectors ending last week in the green.
Still, the risks of Trump 2.0 are real. As Barclays strategist Emmanuel Cau pointed out, every transition brings uncertainty. However, with Trump’s policies largely following a playbook investors have seen before, the adjustment may not be as jarring as it was during his first term.
As Trump prepares to take office, the world will be watching to see how his administration shapes the global economy and financial markets. Investors, for their part, are positioning themselves to navigate the opportunities and challenges ahead.
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