This week, small-cap stocks emerged as major winners on Wall Street, showing clear signs that the so-called “Trump trade” remains robust, even if it had a momentary pause. The iShares Russell 2000 ETF, which mirrors the performance of small-cap stocks, soared more than 4% over the week. In comparison, both the S&P 500 and Nasdaq saw around 1.7% gains, while the Dow Jones Industrial Average increased nearly 2%.
Investors seem to perceive another Trump presidency as a boon for small-cap stocks, largely due to his policies like hefty import tariffs. But it wasn’t just small caps riding this wave; Bitcoin, Tesla, Trump Media & Technology Group, Halliburton, U.S. Steel, and the dollar index all moved upwards. The big question now is whether this momentum can be maintained after showing a bit of wear last week.
Tom Fitzpatrick, a managing director at R.J. O’Brien & Associates, believes the trend has staying power. “I expect this can continue through the Fed meeting, lining up with both the 2016 and 2020 election trends,” Fitzpatrick told CNBC on Friday. “It’s all spurred by the ‘Red Sweep.’ Things might shift come January, but right now, it’s hard to bet against these moves.”
Bitcoin has been on a remarkable run, reaching unprecedented heights since Trump won the presidential election. It crossed the $99,000 mark on Thursday, flirting with the magical $100,000 level. Trump’s potential return to the Oval Office is viewed positively by cryptocurrency investors, especially given his remarks about building a U.S. bitcoin stockpile and the looming departure of SEC chairman and crypto skeptic Gary Gensler in January.
Turning to Tesla, the electric vehicle giant experienced a near 10% jump this week. Tesla has been a notable benefactor of Trump’s electoral victory, partly due to the close ties between CEO Elon Musk and the president-elect. Trump has even appointed Musk as co-head of the newly established Department of Government Efficiency alongside Vivek Ramaswamy.
Trump Media & Technology Group, which runs the Truth Social app and is predominantly owned by Trump himself, also saw an impressive climb of almost 10% this week. Meanwhile, U.S. Steel’s shares leapt nearly 9%, and Halliburton’s rose 7.6%. U.S. Steel could stand to gain significantly if Trump’s proposed tariff of at least 60% on Chinese imports becomes reality. Halliburton’s stock gain echoes how the energy sector responded when Trump was first elected in 2016, according to Jay Woods, chief global strategist at Freedom Capital Markets.
Energy investors are seemingly placing faith in Trump’s “drill, baby, drill” rhetoric. “The energy sector still has some room to grow, even though shares have been under pressure. But that doesn’t guarantee a happy ending,” Woods said. “Energy as a whole still has to prove itself, and the Trump trade didn’t meet expectations during his first term.”
