The Impact of Trump's Victory on Equity Markets: The Power of Proximity

Abstract

This study provides the first analytical evidence on the reaction of U.S. equity markets to Donald Trump's victory in the 2024 Presidential election. Leveraging on a novel textual-based measure of political alignment at the firm level, we uncover significant positive abnormal returns for firms aligned with Trump’s policy priorities. These firms are especially concentrated in the financial, energy, and industrial sectors. This positive equity market response is nonetheless accompanied by rising economic uncertainty, highlighting a potential disconnect between market exuberance and the macroeconomic outlook.

Keywords: equity markets, Donald Trump, abnormal returns, Event study, US 2024 Presidential elections