The Three Catalysts Sending Stocks to the Moon

Keeping with the theme of the week, stocks’ fast-and-furious rally continued again today. Indeed, it was a really, really good day for the markets. 

Sure, at the headline level, the Nasdaq only climbed about 1.5%, while the S&P 500 rose just 0.7%. That’s a pretty normal “good day” for Wall Street; nothing to write home about. 

But if we look underneath the hood, we see that the price action at the individual stock level was quite impressive. 

More than 50 different stocks rallied 20%-plus today. About 15 rallied more than 30%. Seven surged more than 40% higher. Five rocketed over 50%, and two stocks completely doubled…

All in one day. 

That is some truly sensational price action. 

And from what we can tell, three big catalysts are driving this bullishness onward. 

The ‘Trump Bump’ Is Leading Stocks Higher This Week

The most prominent catalyst lighting a fire under stocks this week – what folks are calling the ‘Trump Bump.’ Stocks continue to rally on the belief that President-elect Trump’s policies will be good for the markets. 

While many initially thought that Trump’s tariffs would be inflationary, several experts have begun to second-guess that consensus belief. 

Bloomberg’s Anna Wong is among those dissenters. In a research note this week, Wong laid out what she believes is the most plausible path forward. She anticipates that Trump won’t impose sweeping universal tariffs, which would limit their inflationary impact. And she isn’t alone in that thinking.

In other words, many economists are now shifting their perspective, endorsing the idea that Trump’s tariffs will likely cause some reinflation but nothing worrisome. As a result, Treasury yields actually dropped today as markets placed faith in a Goldilocks outcome – pro-growth policies that don’t spur inflation. 

Rate Cuts and Strong Earnings Tee Stocks Up to Rocket

Rate cuts are also fueling the market’s bullish fires. Earlier this afternoon, the U.S. Federal Reserve announced its decision to cut interest rates by 25 basis points. Plus, Fed Board Chair Jerome Powell said that rate cuts are likely to keep coming. 

Specifically, he said that rates are still restrictive and that inflation still looks to be falling toward 2%. Though he emphasized the central bank’s need to keep a close eye on the incoming data and respond accordingly, he heavily implied that rate cuts should continue.

And last but not least – strong corporate earnings. Several stocks absolutely soared today on the back of impressive quarterly earnings reports. 

For example, marketing firm AppLovin (APP) surged more than 40% after management noted how its new AI-powered ad placement tool, AXON, powered much stronger-than-expected revenue growth at the firm. Housing tech company Zillow (Z) popped more than 20% after it reported impressive growth, despite working against such a tough housing market backdrop. 

Ride-hailing titan Lyft (LYFT) soared about 25% after it reported record ridership numbers. And quantum computing firm IonQ (IONQ) ripped 35% higher after it announced multiple new quantum application development partnerships. 

This impressive outperformance is driving stocks far higher. And we don’t think the gains are over just yet.

The Final Word

Between these three catalysts – the Trump Bump, rate cuts, and strong earnings – investors are very optimistic about the outlook for stocks over the next 12 months. 

And we’re confident that this optimism is not misplaced.

Now, it may be overstated in the short term. Things do feel a bit frothy after today’s big rally. But so long as all three catalysts remain alive and well over the next several months… stocks should keep powering higher. 

As such, we are very bullish on stocks for the foreseeable future. 

Find out what stocks we’re eyeing to drive some gains in this bull rally.

_{On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.}

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