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Can the Trump trade push the markets to new heights?
Tesla rejoins the trillion dollar club
INSIGHT WEEKLY: November 10, 2024
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🌐 Markets Overview
What is the Trump trade?
The Trump trade is generally considered to be mostly associated with tariffs, tax cuts, deregulation, increased fiscal spending, increased drilling for fossil fuels, reduction in federal spending, cryptocurrencies, and higher bond yields.
What will Trump 2.0 be like? With a likely trifecta of the Presidency, Senate, and the House, the new administration will likely make significant changes during its term in office.
Major market indexes:
US markets set new records in the week. The markets appear to have called the result of the election before the networks. And responded positively.
Markets outside the US were subdued mainly due to concerns about the imposition of tariffs on imported goods of 10% to 20% from the rest of the world, and 60% to 100% on goods from China.
Markets v all-time high:
US markets reached all time highs during the week.
S&P 500:
S&P 500 broke through the 6,000 level during the week. As the year-end approaches, it will be interesting to see which forecaster at the start of the year had called the year-end most closely.
Magnificent 7:
Tesla gained 29% in the week mostly due to Elon Musk’s involvement in the election campaign. And Tesla rejoined the trillion dollar club. But the stock is not near its all time high achieved back in 2021.
Automated driving may be subject to less regulation and approvals, though incentives for electric vehicles may be cut back. However, Mr Musk is now in a position of influence in the new administration.
Major Semiconductor stocks:
The current CHIPS Act will likely be supplemented with additional measures and tariffs favoring US based chipmakers.
Over 90% of the $39 billion available under the CHIPS Act has been allocated to support U.S. chip manufacturing, although only one binding agreement has been finalized. TSMC and GlobalFoundries are expected to announce final awards, while others, including Intel and Samsung, are still finalizing contract details. The Biden administration aims to finalize agreements to secure progress before Trump starts his presidency.
US smaller cap companies (Russell 2000):
The prospects of tax cuts and less regulation sent the Russell 2000 up by over 8% in the week.
US Dollar
The USD index gained on the outcome of the election.
Gold has had a muted reaction to the election, and weakened a little, mainly due to a stronger dollar, and even a possibility that geopolitical risks could lessen.
🇺🇸 US economy
Interest rates were cut by 0.25% on Friday as widely expected. With inflation (as measured by PCE) almost at target, the Federal Reserve had been under pressure to cut rates. The first cut was 0.5%, and now the second cut of 0.25%.
What next for interest rates? Probably fewer cuts than previously expected. Maybe none. Maybe even rate hikes after a couple of years.
The next Federal Reserve meeting on interest rates is scheduled for December 17-18.
Inflation risks will increase depending on the scale of the incoming administration’s plans to impose tariffs and reduce taxes.
Tariffs will increase the cost of imports.
Tax cuts will increase demand and therefore also increase prices.
10 year yield dipped in the week after seven consecutive weeks of increases and in anticipation of Friday’s rate cut.
Are bond vigilantes still at work? The underlying conditions are unchanged, and budget deficits are likely to continue to grow under the new administration.
Bond vigilantes sell bonds, pushing yields higher, as a protest against massive deficits.
The US debt is now at $35.7 trillion and the 2024 deficit is over $1.8 trillion.
S&P500 is +4.7% in the week and +25.7% year to date.
🇬🇧 UK economy
Interest rates were cut by 0.25% by the Bank of England, with the Monetary Policy Committee voting 8-1 in favor.
The next Bank of England meeting on interest rates is scheduled for December 18.
Tariffs will affect the UK. The Chancellor will advocate for free trade as a pillar of the UK’s economic strategy. Trump’s stance, along with his recent reappointment of trade representative Robert Lighthizer, has raised concerns over a trade conflict that could impact the UK economy. Goldman Sachs has already cut its UK growth forecast for 2025 from 1.6% to 1.4%, citing potential tariffs as a contributing factor.
Former UK ambassador Kim Darroch cautioned that such tariffs might compel the UK to choose between aligning with the U.S. or the EU.
FTSE100 is -1.3% this week and +4.4% in the year to date.
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🇯🇵 Japan economy
Interest rates are expected to be hiked in January 2025. The Bank of Japan (BOJ) September meeting minutes indicate that when economic conditions are right both in Japan and overseas, the BOJ will consider raising rates.
Nikkei 225 gained 3.8% in the week in response to the US election, as well as the US rate cut.
Nikkei 225 Index is +3.8% in the week and +18% in the year to date.
See previous spotlight on Japan.
🌐 Artificial Intelligence
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OpenAI won a temporary victory as a New York federal judge dismissed a lawsuit from news outlets Raw Story and AlterNet, which claimed OpenAI misused their articles for AI training without authorization. Judge Colleen McMahon ruled the outlets did not show enough harm to justify the lawsuit, though she allowed them the option to file an amended complaint. OpenAI defended its model training practices as protected by fair use and established legal principles.
TSMC, the world’s leading contract chipmaker, will halt production of advanced AI chips for Chinese companies starting Monday, according to the Financial Times. This decision, relayed to Chinese clients, affects AI chips built on cutting-edge nodes of 7 nanometers or smaller. The U.S. government has implemented export controls limiting AI-capable GPU chips to China, citing concerns that these technologies could enhance China’s cyber capabilities or aid in bioweapons development. Future shipments from TSMC to Chinese clients will require U.S. approval. This restriction coincides with a U.S. investigation into a TSMC chip found in a Huawei device, raising concerns over export compliance.
Get your free guide to AI
See previous spotlight on AI chips
🌐 Crypto Corner
Top 10 cryptos:
It is expected that the incoming administration will be pro-crypto.
Tracking Bitcoin price (up to November 8):
Tracking Eth price (up to November 8):
See the previous spotlight on Bitcoin halving
🏅5️⃣ Billionaire Leaderboard
Mostly driven by stock market performance :
Change in week :
Elon Musk (Tesla, SpaceX) $301bn ⬆️ $31bn as Tesla stock gains 29%
Larry Ellison (Oracle) $230bn ⬆️ $23bn as Oracle gains 11%
Jeff Bezos (Amazon) $205bn ⬆️ $19bn Amazon up 5%
Mark Zuckerberg (Facebook/Meta) $203bn ⬆️ $7bn
Bernard Arnault and family (LVMH) $164bn ⬇️ $5bn
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Stay tuned for more insights and updates each week.