The week leading up to President Donald Trump’s inauguration on January 20, 2025, saw a notable U.S. stock markets rally. Investors’ optimism, fueled by the anticipation of pro-business policies, drove major indices and the cryptocurrency market to significant gains. Here’s a breakdown of the key developments.
Stock Markets Rally Across Major Indices
The U.S. stock market recorded its strongest weekly performance since early November 2024, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all experiencing notable increases.
The S&P 500 rose 1% on Friday, closing at 5,996.66, and achieved a 2.9% weekly gain, turning positive for January 2025. This rally reflects broad-based optimism among investors, particularly in sectors expected to benefit from the incoming administration’s economic agenda. The Dow Jones Industrial Average also showed robust performance, increasing by 0.8% on Friday to end at 43,487.83, with a weekly gain of 3.7%. Notably, the index surpassed its 50-day moving average, a significant indicator of upward momentum.
Meanwhile, the Nasdaq Composite climbed 1.5% on Friday to close at 19,630.20. Its weekly gain of 2.5% was driven by strong performance in tech stocks, which benefited from declining Treasury yields and investor sentiment favoring growth-oriented sectors.
Sector Performance: Financials and Energy Lead the Charge
The stock markets rally was particularly pronounced in the financials, energy, and materials sectors. Wall Street banks like Citigroup, Goldman Sachs, and Morgan Stanley saw surges of approximately 12%, bolstered by strong fourth-quarter earnings and expectations of potential deregulation under the Trump administration.
Energy stocks also thrived, reflecting a rebound in oil prices and anticipation of relaxed regulatory oversight. Materials companies gained traction as investors bet on increased infrastructure spending and a pro-business legislative agenda. These sector-specific gains underscore the market’s focus on policies that could stimulate corporate profitability and economic growth.
Cryptocurrency Market Surges Amid Pro-Crypto Sentiment
The cryptocurrency market mirrored the stock market’s upward trajectory, with Bitcoin reaching its highest level in a month. Trading at $105,000, Bitcoin’s surge was fueled by anticipation of a crypto-friendly regulatory environment under President Trump. His administration’s discussions about creating a strategic bitcoin reserve further boosted investor confidence.
The broader cryptocurrency market also benefited from this sentiment, with altcoins experiencing significant gains. The rally underscores the growing intersection between traditional financial markets and digital assets, driven by evolving investor expectations and regulatory clarity.
Investor Sentiment and Treasury Yield Declines
Investor sentiment during this period was bolstered by declining Treasury yields. The 10-year note experienced its most significant weekly decline since late November 2024, reducing borrowing costs and enhancing the attractiveness of equities. This trend particularly benefited tech and small-cap stocks, which are sensitive to interest rate fluctuations.
Despite the stock markets rally and overall optimism, some investors exercised caution due to uncertainties surrounding President Trump’s trade and immigration policies. These factors could influence inflation and the Federal Reserve’s interest rate decisions, prompting market participants to adopt a “wait and see” approach.
A Hype-Driven Momentum: Comparisons to the 2024 Election Stock Markets Rally
The current market rally draws parallels to the surge observed after Trump’s election victory in November 2024. In the week following the election, the S&P 500 rose by 2.9%, marking its best performance in months, while the Nasdaq Composite gained 2.5%.
Bitcoin also experienced a remarkable ascent, surging from $69,374 on Election Day to $106,490 in the weeks following the election. This increase was largely driven by Trump’s pledge to establish the U.S. as a global cryptocurrency hub and his pro-business stance. Expectations of a more crypto-friendly regulatory environment and discussions about a national bitcoin reserve added to the bullish sentiment.
The cryptocurrency and stock markets rally ahead of Trump’s inauguration reflects the significant impact of political developments on financial markets. While optimism drives gains, the potential for volatility remains as investors await concrete policy announcements. The coming weeks will reveal whether this hype-driven momentum translates into sustained growth or temporary market fluctuations.
