Post-election sector momentum

It’s been a month since the stock market jumped to fresh record highs after the November 5 election. While some shifts were apparent in the market before the vote took place, a “before and after” sector snapshot suggests investors moved toward some areas of the market—and, possibly, toward certain stocks—much more forcefully than others.

The following chart compares how each of the S&P 500 sectors performed before and after the November 5 election. The blue columns show the year-to-date percentage returns through November 5, while the orange bars represent the post-election returns through December 5:

While communication services and tech were the strongest sectors until the election—and remain the year-to-date leaders—they weren’t the biggest gainers over the past month. That honor goes to consumer discretionary and financials. (At the opposite end of the spectrum, materials and health care were relative laggards both before and after the election.)

To put the post-election momentum shifts in better perspective, the chart below shows which sectors have gained the most since the election relative to how much they gained before it. For example, the consumer discretionary sector’s 13.1% return since November 5 is 81% of the 16.2% it gained this year prior to the election. Financials and consumer staples also made bigger gains relative to their pre-election returns than either communication services or tech:

But there may be more—or less—to some of these shifts than first meets the eye. For example, the big post-election gain in consumer discretionary was largely powered by auto stocks, and it’s no coincidence that Tesla (TSLA), which was in negative territory for the year on November 4, has rallied more than 50% since then.

Meanwhile, the increased momentum financials is likely tied in part to expectations that the industry is poised to benefit from the deregulation many investors expect from a Trump administration.¹ But Morgan Stanley & Co. strategists see other tailwinds that could support the sector, including a rebounding capital markets backdrop, strong earnings revisions, and the potential for accelerated buybacks.²

Market mover update: Celanese (CE) dropped below $70 on Thursday—the lower strike price of the possible options strangle discussed in “Large trader playing the range?”

Today’s numbers include (all times ET): Employment Report (8:30 a.m.).

Today’s earnings include: Genesco (GCO).

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¹ MorganStanley.com. What the Trump Victory Means for Markets. 11/7/24.
² MorganStanley.com. Uncertainty Surrounds 2025 U.S. Equities Outlook. 11/26/24.