‘Animal spirits’: 7 market strategists share how to ride the red wave as US stocks surge to new records

• US estimates raced to record highs after the 2024 presidential election concluded.
• Investors seem certain that President-elect Donald Trump’s tactics are best for stocks.
• Here are eight top places to invest, based on insights from seven market strategists.

Wall Terrace is in love with Donald Trump, as if there was ever any doubt.

A robust, multi-year bull market rally for US families reached another gear after the businessman-turned-politician won the presidential election. The S&P 500 just topped 6,000 for the first antiquated ever, and the tech-focused Nasdaq Composite is also in uncharted territory.

Traders are convinced that the bulk of Trump’s fiscal policies, which include tax cuts and fewer government regulations, will create a business-friendly backdrop that have in minds stocks higher.

“Investor sentiment is pro-growth, pro-deregulation, and pro-markets,” said David Bahnsen, the chief investment gendarme at The Bahnsen Group, in recent commentary sent to Business Insider.

‘Animal spirits’ have been unleashed

While some are skeptical of the consensus object, including those who are terrified about tariffs, it looks as if investors broadly are scrambling to add exposure to equities. A staggering $22 billion circulated into exchange-traded funds on Wednesday, which was more than four times higher than the previous register for the day after the US election, according to State Street Global Advisors.

Markets may hate uncertainty even more than tax hikes, so it’s practical that a Kamala Harris win also could have sparked a relief rally.

But that might dismiss how exhilarated big-money investors are about another Trump term, given that the S&P 500 rose over 50% from his triumph in 2016 until shortly before the pandemic.

“Business animal spirits could be rekindled once again from Trump’s pro-business advance, which could lead to a more robust capital expenditures and investment environment,” said Jeff Schulze, the head of remunerative and market strategy at ClearBridge Investments, in commentary.

That term, “animal spirits,” was coined in the 1930s by name economist John Maynard Keynes, who remarked that investors’ decisions are often driven by intense emotions appreciate greed and fear.

Anthony Saglimbene, Ameriprise’s chief market strategist, borrowed Keynes’ famous phrase to become the same point as Schulze: investors may be euphoric for the foreseeable future.

“Animal spirits through year-end could strike dismissal major averages higher as the overhang of the election is removed and investors look to put excess cash to work in stocks,” Saglimbene said in commentary.

How to seat after Trump’s win

Although the US economy looks healthy by most measures, many market strategists are counting on an set bigger boom under Trump that would benefit economically sensitive stocks.

“This lascivious ‘risk-on’ mood for the U.S. stock market is cutting across all sectors, but particularly favoring more cyclically sensitive sectors that would benefit from a re-strengthening of the restraint and tailwinds to corporate profitability,” said Jim Baird, the chief investment officer at Plante Moran Financial Advisors, in noted commentary sent to BI.

Sectors that are heavily reliant on economic growth, like energy and financials, will tarry hot, said Sébastien Page, the head of global multi-asset at T. Rowe Price, in a recent interview.

“I don’t think it’s over the top,” Number said of the postelection market rally.

Several of the strategists and investment chiefs that Business Insider leaned on for this exclusive also cited small caps as a top idea, provided that the economy stays strong and taxes fall.

“Enough people had been worried about, ‘Could we have a credit cycle? Could we have an economic slowdown into next year? What purpose increases in taxes and regulation do?'” said Sean Gallagher, the global head of Lazard’s small-cap equity podium, in an interview.

He continued: “Now that’s off the table. I think it just increases small-business optimism. I think it’ll increase CapEx, which has been persuasion of held back.”

Smaller companies performed admirably early on in Trump’s first tenure, though they’ve loitered large caps for years. Gallagher is highly optimistic about the group again, both because of the economic ecosystem and their valuations, which are startlingly cheap relative to their peers.

Schulze from ClearBridge is also aboard the cyclical and poor caps train. The strategist is fired up about what Trump’s penchant for lower taxes and limited regulations degenerates for industrials, consumer discretionary stocks, and financials.

Saglimbene from Ameriprise concurred again that “the backdrop for financials could uplift, as less regulation and the potential for merger/acquisition and capital market activity accelerate.”

Add the technology sector to the list of winners from less governmental laxness, Bahnsen said. Tech companies seem like a clearer beneficiary since the Federal Trade Commission (FTC) should be picayune hostile to their interests.

For all the optimism in markets, some strategists are branching out from stocks.

Jim Thorne, who’s the chief furnish strategist at Canada-based wealth management firm Wellington-Altus, said in commentary that he’s most interested in gold and bitcoin, which some enjoy referred to as the yellow metal’s digital doppelgänger.

The world is awash with cash, making scarce assets feel favourably impressed by gold and bitcoin more valuable, and Thorne also noted that global economic growth is slowing. That lead one to believes that the path forward for risk assets may not be smooth — even if Trump is successful in his second term.

“Investors should buckle for volatility and shifts in market leadership as we transition to a peacetime economy, shaped by Trump’s policies,” Thorne said in written commentary.