Investors are betting on a market melt-up

A roaring market rally since the U.S. presidential election has driven up the price of everything from shares of technology and manufacturing giants to cryptocurrencies.

- Gunjan Banerji

Investors have stampeded into funds tracking U.S. stocks and picked up trades that would profit if the rally that recently sent the S&P 500 above 6000 for the first time reaches new heights. U.S. equity exchange-traded and mutual funds drew nearly $56 billion in the week ended Wednesday, the second-largest weekly haul in records going back to 2008, according to EPFR data. Such funds have drawn inflows for seven consecutive months, the longest streak since 2021, when a dizzying market melt-up sent stocks to repeated records.

Driving the optimism? Many investors said they expect lower taxes and fewer regulations during Donald Trump's second term as president.

Dominic Rizzo, a technology portfolio manager at T. Rowe Price, said tariffs could boost U.S. manufacturing, driving a surge in domestic spending and investment. Other investors are simply breathing a sigh of relief that the election has passed.

The share of investors surveyed by the American Association of Individual Investors who said they were bullish jumped to 49.8% this past week, while the share of those reporting a neutral sentiment dropped to the lowest level since 2022. About 40% of those surveyed said the U.S. election made them more optimistic about the market.

"Animal spirits are alive and well right now," Rizzo said.

Rizzo oversees shares of Nvidia and other tech giants. After a big run-up, he is still optimistic about the group ahead of Nvidia's earnings report Wednesday. Investors are also fixated on the presidential transition and how it might shape the market's winners and losers.

Some market watchers caution that investors might be too quick to latch on to policies that could boost markets, while ignoring plans that might stir inflation and market volatility.