The stock market mood continued to attract investors. On Monday, the Dow added 440 points, closing at a record high. Buying momentum is due partly to the post-election optimism. In addition, President-elect Trump chose Scott Bessent as Treasury secretary.
Bessent has international investing experience. He has America’s agenda in mind. As a result, markets are expecting American firms will benefit from policies that protect their domestic markets.
Risks
U.S. tariffs on imports are the biggest unknown for markets. A sudden increase in tariffs could shock consumers. Walmart (WMT), Dollar Tree (DLTR), Costco (COST), and Dollar General (DG) buy goods from foreign firms. They would likely pass the tariffs on consumers, causing inflation.
Markets are anticipating deficit spending to increase. Bond markets traded lower after the elections. Higher Treasury bond sales in the next four years to raise funds could hurt the U.S. Dollar (DXY).
Upcoming Inflation Report
This Wednesday, the government will release the Personal Consumption Expenditures (PCE) index. Economists expect core PCE to rise slightly. This decreases the chances of the Fed cutting rates next month.
Your Takeaway
The Dow has only 30 stocks. Nvidia (NVDA), its most recent addition, could send the index to new highs. However, if AI does not offer anything useful to corporations, Nvidia’s weak stock would hurt the Dow.
