Small Cap, Financials, Tesla ETFs Surge After Trump Win

Shares of financials, small caps, and Tesla surged on Wednesday after Donald Trump won the 2024 U.S. presidential election.

The iShares Russell 2000 ETF (IWM) spiked more than 5%, its largest single-day gain since November 2023, while the Financial Select Sector SPDR Fund (XLF) jumped nearly 6%, its best showing since November 2020.

Investors are hopeful that a new Trump administration will lead to fewer regulations, benefiting smaller companies and financial service companies.

A Trump presidency is bullish for small caps, wrote Chris Senyek, chief investment strategist at Wolfe Research, because of “(i) Trump’s domestic focused agenda, (ii) deregulation policy increases small business confidence, (iii) higher M&A/sponsor activity with weaker DOJ/FTC (iv) extension of individual/pass-through tax cuts, (v) a larger fiscal package passed by Congress in 2025 removing downside to U.S. growth.”

Meanwhile, Mike Mayo, Wells Fargo equity analyst, noted that “more free markets imply that investment banking revenues have a chance at exceeding 2021 levels over the next few years.”

He added that “the chance for more loan growth seems higher now that the election is behind and corporates are likely to have a more ‘risk on’ attitude. This is a key debate given that more loan growth can lead to more [net interest income], revenue, and EPS growth.”

Tesla, TSLL Rise

Another big winner on the day was Tesla, the electric vehicle maker headed by Elon Musk.

While Trump’s victory is widely seen as a negative for the electric vehicle industry on the whole, Tesla specifically could benefit, according to some analysts.

"The biggest positive from a Trump win would be for Tesla/Musk. A Trump win is a negative for the EV industry as the EV rebates/tax incentives get pulled, however for TSLA a huge positive for scale/price advantage.  A Trump win could add $40-$50 to Tesla,” Dan Ives, Senior Equity Research Analyst at Wedbush Securities, said.

Gene Munster, managing partner at Deepwater Asset Management, added that he thinks that a Trump administration is positive for Tesla’s robotaxi initiatives.

“I believe the move [up in Tesla’s stock] is based on emotion, that emotion is Elon made a big bet and was right. This gives investors confidence that his next big bet has a greater potential to succeed. His next big bet is autonomy.”

“Elon says he’s betting the company on autonomy, and his relationship with Trump improves the chances that the Federal government moves more quickly to approve Elons plans. This is important given the regulator side of autonomy is more difficult to move forward than the tech side. Elon still has to deal with the States.”

Shares of Tesla were trading up by as much as 15% on Wednesday, fueling gains of 30% for the Direxion Daily TSLA Bull 2X Shares (TSLL).