The U.S. stock market erupted with gains following Donald Trump‘s victory in the 2024 presidential election and a potential Republican sweep of Congress. This sets the stage for what some analysts call a new “Roaring 2020s.”
The S&P 500 — tracked by the SPDR S&P 500 ETF Trust SPY — jumped 2.5% to fresh record highs on Wednesday, marking its best one-day performance in nearly two years and the strongest ever in a post-Election day.
Analysts and investors speculate that Trump’s planned corporate tax cuts and deregulation could fuel a prolonged rally in the stock market.
Notably, small-cap stocks, represented by the iShares Russell 2000 ETF Trust IWM, surged 5.8%, reflecting investor optimism that domestic-focused companies could benefit most from protectionist policies expected under Trump’s administration.
Chart: Small Caps Jump Nearly 6% After Election Day
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A ‘Roaring 2020s’ Market Rally?
Veteran Wall Street investor Ed Yardeni described this post-election surge as “consistent with a Roaring 2020s scenario.” Yardeni believes that Trump’s policies could increase the odds of robust economic growth, strong corporate earnings, and an extended bull market.
“Stocks soared today on the widespread perception that Trump 2.0 will include a cut in the corporate tax rate and reductions in business regulations,” Yardeni wrote in a note on Thursday.
According to Yardeni, the conditions are shaping up for an economic boom similar to the 1920s — a period of rapid economic growth, technological advancement, and soaring stock prices.
But the economic boom of the 1920s eventually led to a stock market crash in 1929 and the onset of the Great Depression.
Yardeni draws a parallel, quoting Mark Twain: “History doesn’t repeat itself, but it often rhymes.”
The expert assigns a 50% probability to the “Roaring 2020s” scenario, a 20% probability to a “1990s-style stock market meltup,” and a 30% chance of a “1970s-style geopolitical crisis with a possible U.S. debt crisis.”
Yardeni also indicates that he is considering increasing the probability of the Roaring 2020s scenario, given the likelihood of a more business-friendly environment under Trump.
How High Could The S&P 500 Go?
Yardeni has bold projections for the S&P 500 if the “Roaring 2020s” scenario materializes.
He estimates an average annual return of around 11% for the S&P 500, including reinvested dividends.
This forecast sharply contrasts with the one presented by Goldman Sachs last month, where analysts at the investment bank predicted a decade of modest gains for stocks, with the S&P 500 averaging just 3% annually over the next 10 years.
In Yardeni’s view, stocks remain the best hedge against inflation, as companies can often pass on higher costs to consumers.
Under his “Roaring 2020s” scenario, strong productivity growth and stable inflation rates could bolster corporate profits and sustain the market’s upward trajectory.
Yardeni expects the S&P 500 could climb to 8,000 by the end of the decade, driven largely by rising corporate earnings rather than inflated valuation multiples.
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