By Andrew Welsch

Shares of wealth managers and brokerage firms such as Charles Schwab, Robinhood, and Morgan Stanley soared Wednesday morning as President Donald Trump's election ushered in expectations for less regulation and a more business-friendly environment.

Schwab's stock rose 5.2% Wednesday morning. Brokerage firms Robinhood Markets and Interactive Brokers jumped 16.66% and 9.81%, respectively. Shares of Morgan Stanley and Stifel Financial, which operate large wealth management and investment banking businesses, were up 11.39% and 11.46%, respectively.

The S&P 500 was up a more modest 1.86%.

Overall, financial stocks were rising in anticipation that a new Trump administration will take a friendlier approach to Wall Street than the current Biden administration. The SPDR S&P Bank ETF, which tracks a basket of financial services companies, rose 10.13%.

Jeff Schulze, head of economic and market strategy at ClearBridge Investments, says Trump's pro-business approach could lead to a more robust capital expenditures and investment environment. "A more favorable corporate tax regime, full extension of the Tax Cuts and Jobs Act, and a lighter regulatory touch should outweigh the potential headwinds from increased tariffs and reduced immigration on corporate profits," he says.

Investors also anticipate that mergers and acquisitions activity could pick up during a second Trump administration, which would benefit wealth management companies that also operate investment banks such as Morgan Stanley, Stifel, and Raymond James Financial. The latter was 9.06%.

Although control of the House of Representatives was not clear as of Wednesday morning, Republicans had captured enough Senate seats to retake control of the chamber, which should make it easier for Trump to appoint officials to government agencies such as the Securities and Exchange Commission. Trump has already threatened to fire Chairman Gary Gensler, who has staked out an aggressive regulatory approach.

Jeff Schmitt, analyst at William Blair, notes that several wealth management companies, including Wells Fargo and LPL Financial, had disclosed SEC inquiries into cash sweep practices (firms have been moving or "sweeping" clients' uninvested cash into low-paying bank accounts). That raised investor concerns over the summer that weighed on stocks. "The thought is that with a new Trump administration, they would not move forward with that," he says. "It effectively takes the issue off of investors' minds."

Trump will likely replay moves from his first term as president, such as rolling back Department of Labor regulations imposing expanded fiduciary obligations on financial advisors, which the wealth management industry has previously criticized as too onerous. In April, the Biden administration unveiled a final version of its proposed fiduciary rule.

Cryptocurrencies are also benefiting from Trump's election win. During the campaign, Trump indicated his support for crypto. Ethereum and Dogecoin rose Wednesday, and Bitcoin hit a new record high, briefly topping $75,000. Crypto stocks also jumped; Coinbase soared 22.83%. That may also be benefiting Robinhood which has expanded its offerings to include cryptocurrency trading.

Write to Andrew Welsch at andrew.welsch@barrons.com

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November 06, 2024 12:19 ET (17:19 GMT)

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