The fourth quarter of 2024 delivered a striking reflection of President-elect Donald Trump’s policy influence, with investment trends in sectors favored by his administration dominating the financial landscape. Dubbed the “crypto president,” Trump’s plans to establish a “strategic national Bitcoin stockpile” and his intention to appoint crypto-friendly regulators have propelled digital assets to the forefront of investor interest.
Digital Assets emerged as Morningstar’s top-performing fund category for the quarter, with average fund returns surging by 37.9%. The newly launched iShares Bitcoin Trust exchange-traded fund drew an impressive $5.8 billion in investor inflows in November alone, closing the quarter with a 47.7% gain. Energy Limited Partnerships, another Trump-favored category comprising oil and gas pipeline companies, followed with a 9.3% increase, benefiting from his “drill, baby, drill” agenda.
In contrast, the broader S&P 500 index posted a modest quarterly return of 2.4%, marking a subdued finish despite its 25% gain over the year. However, certain trends that buoyed markets earlier in the year reversed sharply. The Federal Reserve’s announcement on December 18 of scaled-back rate cut expectations—down to two from four for 2025—dented bond and dividend-oriented stock fund performance. Morningstar’s Long-Term Bond category, for instance, saw a 5.5% decline after a strong 7.6% gain in the previous quarter.
Utilities funds, which offer attractive dividends, fell 4.0% after a 17.5% rally in the prior quarter, while dividend-heavy Real Estate funds dropped 7.0%. Value funds, which often prioritize dividend-paying stocks, also faltered, with the average Large Value fund down 1.5%.
Banks and financial stock funds, however, bucked the trend. The Financial Select Sector SPDR ETF surged 6.1% on November 6, the day after Trump’s election victory, outperforming the iShares Core S&P 500 ETF’s 2.5% gain. Overall, the average Financial fund gained 6.3% for the quarter, supported by anticipation of Trump’s deregulatory agenda. Big Tech also remained resilient, with the Technology sector returning 6.0% during the quarter.
Trump’s deregulatory plans, including proposed rollbacks of the Dodd-Frank Act, have sparked debate. Critics highlight risks of a repeat of the 2008 financial crisis, but deregulation promises short-term gains for banks and financial institutions. The Financial category ended the year with an impressive 24.9% return, outperforming Technology funds, which gained 22.0%.
The crypto and energy sectors continued to dominate individual fund performance. GraniteShares 2x Long PLTR Daily ETF topped the charts with a 263.1% gain, while funds tied to Tesla benefited from CEO Elon Musk’s $250 million donation to pro-Trump campaign groups. Meanwhile, funds linked to green energy, such as the Invesco Solar ETF, struggled, posting a 22.4% quarterly decline in anticipation of policy changes under Trump.
As Trump’s administration eyes Bitcoin as a key element of its economic strategy, questions linger about its implications for the U.S. dollar’s global dominance. With 95% of Bitcoin already mined and controlled largely by a small group of holders, the government may face significant challenges in building its proposed Bitcoin stockpile. Analysts warn that promoting Bitcoin could weaken the dollar’s status as the world’s reserve currency, a shift that could have far-reaching economic consequences.
Looking ahead, whether these Trump-driven investment trends will persist remains uncertain, but the early signals suggest a financial landscape primed for volatility and opportunity in 2025.
