Both the Standard & Poors and the Dow Jones Industrial average posted lower numbers in late morning trading on Wednesday as financial stocks fell on the heels of Donald Trump’s presidential election win, following an impressive seven-day rally. But while those two fell, a slight recovery in technology boosted the Nasdaq index.
It is not really that much of a surprise that US stocks have been on a major decline since Trump’s surprising victory, on Tuesday. However, the impact is shocking since the Dow had closed four days in a row at record levels, prior to the election.
Now, Trump claims to have a plan for cutting taxes and raising infrastructure spending. He says that this will boost economic activity but experts advise that the aspect of the proposal to impose new tariffs on cheap imports would probably drive inflation rates even higher.
And that prospect seems to have influenced expectations that the Federal Reserve will raise interest rates faster than originally anticipated. And this has boosted the dollar index to a 14-year high.
Obviously, December is around the corner and thus everyone expects the Fed will hike interest rates—that is to say, so long as there are no major shocks to the system. Traders are currently pricing in an 81 percent chance the central bank will, in fact, raise the interest rats next month.
“We’ve seen markets rally sharply since the election and now its time for a very reasonable reassessment of what’s going on. ‘Have we gone too far too fast?’ This is a bit of a reality check,” explains Brad McMillan.
The chief investment officer at Commonwealth Financial goes on to say, “At this point, a December rate hike is baked in. It would require something pretty exceptional for the Fed not to hike.”
As such, the tech sector has gained nearly 11 percent since the election. This is the biggest jump by the S&P sector.
Baird brokerage comments, “Investors should book gains and wait for more evidence that the structural improvement in macro trends and regulations will materialize.”
Overall, the S&P 500 index found 11 new 52-week highs and two new lows; the Nasdaw recorded 113 new highs as well as 15 new lows.