The iShares Russell 2000 ETF (IWM), which tracks small-cap stocks, soared 6.59% in pre-market trading on November 6, 2024, following Donald Trump's surprise victory in the U.S. presidential election. The resounding win by Trump and his Republican party, which is also projected to take control of the Senate, has fueled expectations of pro-business policies and fiscal stimulus measures.
According to market analysts, Trump's promised tax cuts and potential infrastructure spending plans are driving optimism among investors, particularly in the small-cap sector. The Russell 2000 index, which comprises small-capitalization companies, is seen as a beneficiary of these policies, as smaller firms tend to be more domestically focused and sensitive to changes in the U.S. economy.
Additionally, the clarity provided by the election result has alleviated concerns about potential political and legal wrangling, boosting investor confidence in the near-term economic outlook. While uncertainties remain regarding the composition of the House of Representatives, the market appears to be pricing in the likelihood of pro-growth policies under a Republican-controlled government.
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