Weekly Stock Spotlight: Trump Victory Propels Small-Cap Surge and US Outperformance

Weekly Stock Spotlight: Trump Victory Propels Small-Cap Surge and US Outperformance

Charu Chanana

Chief Investment Strategist

Key points:

  • Trump’s Victory Fuels Market Confidence: The Red Sweep in the US elections has helped to clear uncertainty, fueling optimism in sectors like financial services, defense, and small-caps, especially regional banks.
  • China’s Stimulus Disappoints: The 10 trillion yuan debt relief package offers stability but falls short of boosting consumption and the property market, dampening near-term market optimism.
  • Equity Rotation: The market is shifting beyond tech dominance, with small-cap stocks and cyclical sectors benefiting from pro-growth policies, though earnings growth remains a key factor to watch especially for the small-cap space.
  • Earnings Focus: Investors will watch Disney’s Q4 report on streaming and theme parks, while Home Depot faces pressure from high interest rates and consumer uncertainty.

---------------------------------------------------------------------------------------------------------------------------------

US Elections: Trump Victory Clears Path for Pro-Growth Policies

  • Election Outcome Clears Uncertainty: Trump’s sweeping victory across swing states removes election uncertainty, creating a smoother path for market confidence. Though some House races remain uncalled, a Red Sweep appears likely, strengthening expectations for policy continuity and economic support.
  • Focus on Pro-Growth Policies: Investors anticipate Trump’s tax cuts and deregulatory stance, which underscore U.S. market resilience and exceptionalism. Sectors benefiting from his agenda, particularly those tied to domestic growth and smaller-cap companies, are already seeing gains. The financial services sector stands out, with regional banks spiking 10% on hopes of regulatory relaxation, lower capital requirements, and a friendlier M&A landscape. For an in-depth discussion on which sectors and stocks were the winners and loser in the aftermath of the US elections and what it means for Big Tech, read this article.
  • Fiscal Risks and Inflation Watch: The other side of this growth-focused agenda is rising fiscal pressure. Extending current tax cuts could push deficits up by an estimated $5 trillion by 2034, driving national debt further above 100% of GDP. Additionally, any tariff escalations or tightened immigration policies could add inflationary pressures, particularly concerning after recent inflationary years. Investors will be closely watching the U.S. CPI report on Wednesday; a stronger-than-expected reading could challenge the Fed’s dovish pivot, potentially pointing to a shallower rate cut cycle.

Equity Rotation: Small-Cap Stocks Shine, But Can It Last?

  • Growth vs. Inflation Outlook: Despite expectations of a gradual easing cycle from the Fed, strong U.S. economic growth is expected to support corporate earnings, keeping stocks in play. With S&P 500 earnings forecast to accelerate from 0.5% in 2023 to 9% in 2024 and 14% in 2025, risk-reward for equities remains tilted higher.
  • Broadening Leadership: Since Q3, the market has shifted beyond its tech-heavy leadership, with value stocks, cyclical sectors, and small- and mid-cap stocks now gaining momentum. With potential tax cuts and deregulation on the table, this could add fuel to the rally. Key Trump Trade themes of reshoring, defense and domestic production could mid-cap U.S. stocks and industrials could remain well-positioned.
  • Can the Small-Cap Rally Be Sustained? The Russell 2000 small-cap index jumped 8.5% last week to all-time highs, outperforming the S&P 500 (+4.7%) and NASDAQ 100 (+5.4%). However, this rally could face obstacles due to weak earnings growth, with nearly 40% of Russell 2000 companies unprofitable. It’s crucial to be selective, with focus on small-caps that show strong financial health. For a complete primer on the small-cap Russell 2000 index, read this article
  • International Risks: Risks like trade tensions and a potentially stronger dollar could hinder international equities. As such, underweighting developed-market international stocks and instead positioning for relative strength within U.S. markets could be attractive in this environment. Emerging market themes are likely to be more nuanced. Countries exposed to tariffs may struggle, while those driven by domestic demand, like India, or benefiting from supply chain shifts, like Vietnam, could see stronger performance.

China’s Stimulus Misses the Mark: What It Means for Investors

  • Debt Relief Package Unveiled: China's National People’s Congress approved a 10 trillion yuan ($1.4 trillion) debt swap package to help local governments refinance hidden debts, extending relief funding through 2028. This move aims to ease immediate debt repayment pressures and reduce servicing costs, allowing local governments greater budget flexibility to pursue growth targets.
  • Limited Boost to Growth: While the debt relief offers stability, Friday’s announcement lacked additional fiscal stimulus to support China’s sluggish consumption and struggling property market. This conservative approach, some speculate, could signal that Beijing is conserving resources in anticipation of potential anti-China measures under Trump’s administration.
  • Market Reaction Muted: With fiscal measures at the low end of expectations, Chinese markets are showing caution. Although officials have pledged deeper fiscal spending in 2025, the immediate lack of stimulus may curb optimism in the near term. Investors are on alert for further policy actions and tech earnings are a key focus this week, but more importantly any China-related headlines from the Trump administration could add to market volatility.
  • Earnings in Focus: Chinese tech giants Tencent, Alibaba, and JD.com report earnings this week, which could set the tone for sentiment in China’s tech sector amid this policy uncertainty.

Market Movers: Key Stock Outperformers and Underperformers

Source: Saxo

Earnings to Watch: Disney & Home Depot

As we approach the tail end of Q3 earnings season, two high-profile companies are set to report: Disney on Thursday and Home Depot on Tuesday.

  • Disney Preview: Disney’s upcoming Q4 earnings report on November 14 will capture investor attention, with a focus on the performance of Disney+ streaming, theme parks, and CEO Bob Iger’s succession plans, set for 2026. The streaming segment shows profit growth, aided by potential price hikes, and the ESPN streaming service launching in 2025 could further support this trend. However, theme park results may be under pressure due to recent disruptions like the Shanghai closure, the Paris Olympics, and Hurricane Helene. Rising operational costs tied to Disney Cruise Line’s pre-launch activities also pose headwinds. Consensus forecasts for Q4 are as follows:
    • Revenue: $22.45 billion (vs. $23.16 billion in Q3)
    • EPS: $1.10 (vs. $1.39 in Q3)
  • Home Depot Preview: The home improvement giant could face further pressure from high interest rates and ongoing consumer uncertainty. Consensus forecasts for Q3 FY2025 are as follows:
    • Revenue: $39.2 billion (vs. $43.2 billion in Q2)
    • EPS: $3.66 (vs. $4.67 in Q2)

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.