Trump’s victory should allow the Russell 2000 to outperform in the coming months.
The Russell 2000 jumps against the backdrop of Donald Trump’s victory
Russell 2000 futures jumped more than 2% this morning amid Donald Trump’s victory in the US presidential elections. The former American president blithely won the 270 electoral votes necessary to win the White House, to the point of being the first Republican candidate since 1988 (George HW Bush) to win the electoral vote and the popular vote. Furthermore, the Republicans regained the majority in the Senate by recovering two seats from the Democrats and are in the lead in the race for the House of Representatives.
If the Republicans also win the majority of seats in the House, Donald Trump should not encounter great difficulties during his first two years in office in implementing his program. The market reaction is therefore logical this morning, with a clear outperformance of the Russell 2000 against a backdrop of probable deregulation of the banking sector and significant customs tariffs (particularly on imports from China).
This rise in the Russell 2000 could mark the start of a new bullish rally in risky assets until the end of the year, according to seasonality studies. Indeed, not only do risky assets tend to rise sharply in the weeks following the US elections, but also when the stock market is in a strong uptrend since the start of the year. When the S&P 500 was up for at least eight of the first ten months of the year, it consistently ended the year higher than at the end of October, with the exception of 1964.
A bullish rally at the end of the year therefore seems the most likely scenario, led by the most cyclical stocks and small/mid market capitalizations in the United States.
Russell 2000 daily price chart – key levels
The Russell 2000 could surge to its 2021 high by the end of the year
From a technical analysis point of view, the Russell 2000 began to jump as soon as the markets closed on Tuesday, allowing it to exit at the top of the ascending triangle in which it had been operating since this summer.
This exit from the top of the triangle is a positive technical signal which marks the start of a new upward impulse in the index. The next major resistances to watch will be the 2021 record at around 2450 points, then the symbolic threshold at 2500 points. These resistances could be reached by the end of the year, then lead to a delay in the index.
| Entrée | Purchase above 2300 points |
| Objective | 2450 points |
| Stop | 2200 points |
| Risk/Return Ratio | 1 |
Swiss
