Stock Futures Surge and These Areas Are 'Likely Market Winners’ as Republicans Claim Victory

Following Donald Trump's presidential election win and the likelihood of a Republican majority in Washington, the stock market appeared poised for a rally on Wednesday. Analysts at Sevens Report Research highlighted that small-cap stocks and sectors tied to economic cycles would likely benefit from these election results.

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As of early Wednesday morning, futures for the Dow Jones Industrial Average had climbed 3%, while S&P 500 futures were up more than 2%, according to data. Tom Essaye, the founder and president of Sevens Report Research, noted that the market reaction suggested optimism toward a Republican policy sweep, which could potentially pave the way for a significant year-end rally. He emphasized that such a rally would depend on consistent economic growth and steady Federal Reserve support.

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According to Essaye, the anticipated Republican policy direction includes "pro-growth policies" that could stimulate market performance. These policies are expected to involve tax cuts, deregulation, a focus on boosting domestic industries, and renegotiating trade agreements. Sevens Report Research suggested several exchange-traded funds (ETFs) that might outperform under this anticipated policy shift.

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Among them, the Vanguard Value ETF, which focuses on large-cap value stocks in the U.S., and the iShares Russell 2000 ETF, which is heavily weighted in small-cap stocks, were highlighted as likely beneficiaries.

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On the sector level, certain industry-focused funds were expected to see gains. These include the Industrial Select Sector SPDR Fund, the iShares U.S. Aerospace & Defense ETF, the Energy Select Sector SPDR ETF, and the Materials Select Sector SPDR ETF. Essaye explained that these funds align with industries that could thrive under policies promoting U.S.-centered economic growth and investment.

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Financial sector ETFs were also pointed out as potential winners from a Republican-led agenda. The SPDR S&P Bank ETF, iShares U.S. Financial ETF, and SPDR S&P Insurance ETF were among those that could benefit from possible tax cuts and favorable regulatory changes.

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Essaye argued that the market was likely already factoring in a pro-growth stance from the incoming administration, along with an extended or even enhanced version of the Tax Cuts and Jobs Act.

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Drawing a comparison to the market reaction following the 2016 election, Essaye noted that a similar Republican sweep had spurred a 4.5% rally in the weeks leading up to year-end. He suggested that, given the current economic landscape—characterized by stable growth, easing inflation, and potential interest rate cuts by the Federal Reserve—a rally in the S&P 500 to 6,000 or beyond by year-end seemed feasible.

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The S&P 500 closed at 5,782.76 on Tuesday, marking a year-to-date increase of 21.2%, according to Dow Jones Market Data.

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