Or, as the UK Conservatives might announce with enthusiasm: Stock Market, UP! Bitcoin, UP! Dollar, UP!
It’s a great result for business, and while some may exhibit crocodile tears over the result, the reality is that many who supported the Kamala Harris campaign likely recouped their funding due to the market’s bullish response to the TRUMP VICTORY.
In my “Good, Bad, and Ugly” piece from two weeks ago, we hit the nail on the head regarding what a Trump victory could mean for the markets, and indeed, they didn’t disappoint. Even gold prices stumbled after soaring close to our target level of $2,800, but honestly, what’s three bucks’ difference among friends?
With markets going gangbusters, there’s a lot to celebrate. Gains are being seen and, in many cases, cashed in. As someone who’s taken most of my risk off the table, I’m personally just grateful for Bitcoin’s rally! How long this honeymoon period will last is anyone’s guess, but resolving the election uncertainty is undeniably a boost for all investors and for the business as a whole.
The internet is flooded with opinions on what could happen next—some serious, others more speculative.
One oversight I’ll admit to this year was underestimating the scale of fiscal stimulus injected into the market pre-election. Whether it was orchestrated or not, a staggering amount of money was spent elevating the American markets. I’m not suggesting the market’s response was “wrong” – it never is – but now that the election is behind us, that looming shadow of U.S. debt is likely to resurface, and we should pay close attention to how Trump plans to tackle it.
Insiders expect Trump to implement policies that will increase the national debt, at least in the first few months of his term. The larger and darker this debt cloud grows, the heavier the eventual downpour will be.
I have confidence that growth will return, but there’s always a lag between implementing policy changes and seeing their full effects. So, what should we expect next?
Much of the stimulus we’ve seen this year was election driven. I see little reason to expect it to continue at this scale, whether under Democrats or Trump in the next year, which investors need to factor into their expectations.
Trump is positioned favorably right now: whatever happens over the next 12 months, he’s bound to take the credit if things go well. But if the economy or markets slip, he’ll simply shift the blame to the Democrats.
No one knows when this rally will stall, and investors are reluctant to turn bearish while the market is booming. However, if we recognize that much of this year’s strength was built on debt-increasing political stimulus, it’s plausible that without continued stimulus, we may face a significant drop. Once market support fades, any downturn could be steep before finding a solid floor. This pattern isn’t unusual when markets are pushed up by non-economic factors.
Younger readers are undoubtedly excited about the growth prospects of NVIDIA and AI technology, and the promises of what they could bring. I recall similar excitement in 1999 over the internet boom—and we all remember how that story ended. The situation today has an added twist: back in 2000, issues like U.S. debt, the cost of living, and housing prices weren’t nearly as problematic as they are now. Additionally, U.S. relations with European trading partners were much healthier then.
It’s also worth considering that 25 years ago, Europe, particularly Germany and France, was economically healthier than today, and China hadn’t yet become the global manufacturing powerhouse it is now. So, things are not exactly the same.
We can expect Trump to follow through on his promises, but what will that mean in practice? “Drill, baby, drill” will likely lower energy prices, benefiting some sectors but potentially reducing tax revenues that depend on sales percentages. Planned tax cuts are aimed at stimulating growth, but as with all policy moves, it will take time to see results.
Then there’s the prospect of tariffs: while these may be less sweeping than some expect, they’re likely to drive up consumer prices, adding inflationary pressure until domestic manufacturing kicks in to meet demand. None of these actions, however, will address the mounting U.S. debt, at least not in the short term.
Make no mistake—I remain optimistic that the U.S. will return to growth. But I question whether that growth will arrive quickly enough to keep stocks at their current highs.
It’s fantastic to see such strength in the markets, but I believe we’re reaching a point in the cycle where the risk of staying long might outweigh the potential rewards. Caution is advised.
Trying to call the top in equity markets can be a costly endeavor, so predicting when or from what level any pullback might begin is anyone’s guess.
As a cynical friend put it this week, “It’s been a fantastic year for fund managers. At some point, they’re going to want to lock in those profits to secure their year-end bonuses.”
That’s worth a thought!
The post Everyone’s a Winner! first appeared on JP Fund Services.
The post Everyone’s a Winner! appeared first on JP Fund Services.
The post Everyone’s a Winner! first appeared on trademakers.