The stock market reached historic highs on Wednesday after Donald Trump’s victory in the presidential election. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite each reached new record levels.

Here’s what you need to know about why the market reacted the way it did and what it means for your investment strategy.

Why Markets Surged After the Election

Analysts attribute the rise of the market to two key factors:

1. Reduced uncertainty. As I have previously coveredThe prospect of a new government and possible policy changes can create a whirlwind of speculation, leading to market volatility that can unsettle even seasoned investors. The election result – whoever wins – has removed the uncertainty that had weighed on markets ahead of the vote. In fact, the US stock market has always tended to rise whichever party wins the White House.

2. Prospects for a business-friendly government. Investors expect business-friendly policies from a second Trump administration and a Republican-controlled Senate.

The Dow Jones closed up more than 800 points, or 2.9%, while the S&P 500 and Nasdaq gained 2.2% and 3.9%, respectively. As we’ve already seen, Trump has a penchant for rolling back or undoing regulations, benefiting industries that might have received greater oversight under the Harris administration. Banking, energy and technology stocks were among the biggest gainers in the days following the election.

What does this mean for you

While this news may make it tempting to buy shares of Tesla or Bitcoin, you may want to take the time first. Typically, financial advisors caution investors against making sudden and drastic changes to their portfolio based on this one-time event.

THE the so-called “Trump trade” could easily turn into a rocky road: Investors should be wary that elements of Trump’s economic agenda, such as tax cuts and tariffs, could fuel inflation. Additionally, full details of the Republican policy agenda’s timeline and implementation are unclear at this time.

It’s never a good idea to drastically change your investment strategy in response to a specific election outcome. Instead, this might be a good time to rebalance and make sure you are not overly exposed to any one sector or company. So while the rally may be tempting, always evaluate your overall asset allocation before jumping in.

Letting current events constantly influence your financial decisions can lead to emotional stress and decision-making influenced by fear or overconfidence. After all, you are not as objective as you think…here are some tips to avoid losing money. Ultimately, experts recommend staying disciplined and sticking to your long-term investing plan, regardless of who occupies the White House.

And if you have made gains and are planning a significant expense in the short term, convert part of your earnings into cash or certificates of deposit that might be a good thing.