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He S&P 500 reached an all-time high yesterday (November 6) following the US election result. The index ended up 2.53% to close at 5,929 points. Although the index performed well, some American players fared even better. Based on the type of stock that went up, I think I can learn something about what might happen from here.
Acquisition potential
Yesterday's best performing stock was Discover financial services. The stock price jumped 20%. This is also related to capital onewhich increased by 15%.
There is currently a $35 billion deal in play, with Capital One looking to take over Discover. This would create the country's largest credit card issuer by loan volume. However, it is still pending government approval. With Trump's victory yesterday, there is much more optimism that he can soon give the green light to achieve this. Trump is seen as a pro-business person and has made it a key political promise to get the economy going again.
I think this is a really interesting example of how stocks can move based on something like the outcome of an election. He highlights that politics does influence the stock market, including specific situations like this one.
Of course, nothing concrete has been done, so yesterday's jump in these two stocks is purely based on speculation. But since Discover was the biggest winner, it shows the importance investors place on what just happened.
A retail investment favorite returns
One of the other players with the best performance yesterday was tesla (NASDAQ:TSLA). I am seriously thinking about buying this stock and I really should have bought it earlier this summer when the stock dropped!
Over the past year, Tesla stock is up 30% and 15% of this move occurred yesterday. One of the key factors here was the fact that Elon Musk has become a strong supporter of Trump in his election campaign. So I feel like some speculative traders were using Tesla stock as a way to express their opinion that Trump would win. Likewise, if I had lost, I think the stock would have fallen in value.
I don't invest in stocks for that kind of speculation. But looking ahead, I think Tesla could do well. Since Musk is close to the president, I think he could help influence policy regarding the push toward electric vehicles. It could also push for more government aid, favorable subsidy conditions, and other factors that should ultimately benefit Tesla.
Tesla will also benefit from some of Trump's policies, including tax cuts. With some manufacturing plants in the U.S., it may find a greater competitive advantage over its overseas peers, especially if other companies are hit by tariffs.
As a risk, Tesla stock has a P/E ratio of 128. This is very high and could indicate that the stock is overvalued.
