Market Musings 111124: Trump Mania sweeps US stocks
Market Musings 111124: Trump Mania sweeps US stocks
It's all about the US Election result
Given the likely Red sweep (Republicans winning the Presidency and both halves of Congress), US stocks have rallied hard post-election
on expectations of lower taxes and deregulation in 2025 (remember, the President is not inaugurated until January).
US S&P 500 (RSP etf equal-weight) breaks out to a new high
IJR US Small-caps also got a big lift
(as they should actually benefit more from any corporate tax cuts)
Key sectors to lead in this breakout: Financials, Technology, Biotech, Industrials (all equal-weight indices)
a) Financials (RSPF etf)
b) Technology (RSPT etf)
c) Biotech (XBI etf)
d) Industrials RSPN etf)
US dollar has strengthened against major pairs such as the Euro (EUR/USD)
Bitcoin has also broken out on views that Donald trump is pro-crypto
(boosted by strong inflows to bitcoin ETFs)
The PAVE US Infrastructure Development ETF remains a good way to play US investment trends:
In the UK, the IBT International Biotech Trust is following XBI in breaking to new highs
(and still trades at a near 14% discount to net assets, according to The AIC)
PCFT Polar Global Financials Trust is also following US financials higher
(trades at a 6% discount to net asset value)
Defence is also a theme that has benefited from a Trump victory
given his insistence that European NATO members fulfil their 2% defence spending of GDP pledges
See the NATO Future of Defence ETF
and the DFND iShares Global Aerospace & Defence ETF
(despite the problems of Boeing,. once of the largest components)
Have a great week
Edmund
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6 comments
Amazing to witness the flood of money pouring into crypto as I still won’t invest in something I still don’t truly understand. Tesla (NSQ:TSLA) of course is understandable, if frankly ludicrous, based on all normal fundamentals and I sure this stock will be at least 25% lower this time next year . Most of my money is still in NVIDIA (NSQ:NVDA) as its moat is so strong in a product that everyone wants . A cash making machine if ever there was one .
Any thoughts on bonds Edmund would you want to be short duration moving forward ? government over corperate ?
Also be good to get your thoughts on if golds run is now over given such a convincing victory by Trump.
Thanks
Andy
Yes Andy,
On US investment grade corporate bonds, difficult to be too optimistic given the very high valuation (very tight credit spread over government bonds). In the UK, government bonds offer a decent yield, but longer duration would make more sense only where inflation is likely to stay lower i.e. in the eurozone.
On gold, I still think the rally has legs as I am not convinced that there is any fundamental change post Trump. Emerging market central banks still want to diversify out of the US dollar, especially with the threat of more tariffs on the horizon. And let';s not forget that central banks will still be cutting benchmark interest rates, which has typically been very supportive for gold.
Edmund
Thanks Edmund ties in with my thoughts of probably better short duration and credit spreads to tight to really justify moving out of sovereign debt, out of interest how much further do you think the US can push the deficit given increasing I think at a trillion every four months now ?
Is it a case as reserve currency they can go another 25-50% but just accept 10 year yields will be between 5-6% or is the outcome something else ?
Regards
Andy
US market, especially large caps. Bonfire of the vanities me thinks?
More fuel on what is an already an overheated market!
Small cap financials are on fire for sure still... and anything crypto related.Crazy moves and a lot of folk thought NVIDIA (NSQ:NVDA)'s vertiginous move was rather fast.Will have to see whether the hype matches up to the reality when Mr. Trump enters his office.