What Economists Think about the Post-election Stock Rally

In the run-up to the United States presidential election, investors and market analysts tried to anticipate how a win by either of the major-party candidates would affect equities markets. Some—including those at the world’s largest hedge fund, Bridgewater Associates—predicted a victory by Donald Trump could wreak havoc on the markets, and those predictions appeared prescient on election night, when the Dow Jones industrial average dropped 5 percent in after-hours trading as Trump’s victory became increasingly certain.

However, the market’s decline was short-lived. Between election day and January 18, the Dow and Nasdaq composite index ticked up 8 and 7 percent, respectively. But while we’ve seen markets’ short-term reaction to Trump’s win, a question remains: why have the markets rallied? Are expectations about Trump’s policies contributing to higher stock prices?

Chicago Booth’s Initiative on Global Markets put that question to its Economic Experts Panel. The majority of the panel agrees that share prices are up in part because Trump’s policies seem likely to increase corporate profits. Only 10 percent of panelists, however, feel the stock market’s gains have come because Trump’s policies are likely to speed up economic growth in the US overall.