What’s promised on the campaign trail and what comes to reality is often different. But that didn’t stop investors and traders from speculating on the most prevalent and profitable themes under a new administration. So, let’s summarize what moved and the current narrative around why, explains Tom Bruni, head of market research at The Daily Rip by Stocktwits.
Small-caps soar: US stocks rocketed to the upside, led by the small-cap Russell 2000. Trump’s focus on “America first” puts domestically focused companies in the spotlight. Plus, an overall positive backdrop for risk assets has investors and traders willing to venture out on the risk spectrum to make bullish bets.
(Editor’s Note: Tom Bruni is speaking at the 2025 MoneyShow Las Vegas, which runs Feb. 17-19. Click HERE to register)
KRE, IWM, IBIT, TAN, MSOS (5-Day % Change)
Data by YCharts
Regional banks ramp: Remember how the regional banking sector was set to go down the tubes 18 months ago? Well, it’s roaring back on hopes that deregulation and a focus on the domestic economy will be good for business. Reduced capital requirements could help fuel greater profit growth and free up capital for buybacks and dividends.
Bitcoin and crypto-linked stocks roar: An expectation for softer cryptocurrency regulations (and deregulation in general) drove the market. Bitcoin hit new all-time highs, while crypto-related stocks surged.
Solar stocks extinguished: The regulatory and overall fiscal support for renewable energy will likely be softer than it was under the Biden Administration, weighing on the sector. Additionally, tariffs could impact the China-linked industry.
Electric Vehicle (EV) stocks slump: Regulatory support for EVs is likely to lessen under the Trump Administration. But many view this industry headwind as a positive for Tesla Inc. (TSLA) because of its massive head start in the space. Additionally, Elon Musk’s close relationship with Trump and Trump’s focus on "beating" China are seen as major tailwinds for the next several years.
Marijuana stocks were smoked: With Kamala Harris and the Democratic party seen as more pro-marijuana, much of the optimism around reclassification at the federal level was taken out of the market. Additionally, with states like Florida voting against recreational marijuana (albeit by a small margin), the regulatory environment will likely remain challenging for these companies.
Housing and real estate stocks slump: Higher rates are the story here. Mortgage rates above 7% have already choked housing market activity and frozen commercial real estate transactions. But if Trump’s policies keep rates higher for longer, then the pain in these sectors could persist.
These were some of the biggest themes in markets Wednesday. Some of these moves are knee-jerk reactions to what investors think is ahead for US government policy and the economy. Eventually, the actual fundamentals will matter. But for now, the market is trading on expectations (aka vibes), which remain bullish.
