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Weekly Market Bites
the financial news you need
Al Atencio
November 01, 2024 • Estimated Reading Time: 6 minutes
Welcome to your weekly market wrap-up.
The weekend is almost here, so grab a cup of coffee, get comfortable, and catch up on financial markets.
I’ve been doing the reading and scrolling, to bring you the most relevant updates.
end of week markets update
1) The US election is the big topic this week. And election polls are showing a super tight election:
On the other hand, betting markets have Trump with clear a lead:
2) One of my favorite investors, the legendary Stanley Druckenmiller, sees financial and betting markets acting like Trump is the likely winner.
More importantly for policies and markets: A Trump victory has good chances of coming with a Republican sweep of both Congress and Senate.
“A red sweep is probably more likely than a Trump presidency with a blue Congress. This is because anybody who votes for Trump is probably not going to switch their allegiance”.
The good:
“A red sweep, I think you get animal spirits in the business community. You get deregulation and there might be some sort of uplift relative to where they were in terms of the business community. So I think the economy could be potentially stronger for three to six months.”
And the bad:
“There could be a bad response from the fixed-income markets (due to more fiscal spending and deficits), which could then snuff out the equity rally.” He also thinks the Federal Reserve will be more hawkish under a Trump administration and red Congress.
3) This week BTC almost touched the March all-time highs of around $73,000.
People are buying:
$IBIT took in more cash than any other ETF in the world over the past week. This is out of 13,227 ETFs, which includes $VOO $IVV $AGG etc. It's so hard to beat those veteran Cash Vacuum Cleaners, even for a week, especially for an infant ETF (3mo-1yr old)
— Eric Balchunas (@EricBalchunas)
7:43 PM • Oct 31, 2024
4) One week from the election the US economy is looking pretty solid.
Look at these three headlines for three completely different economic blogs:
5) The skies look pretty clear for the economy and financial markets, except for the nagging worry that stocks are expensive and this is likely to weigh on future returns for what’s left of this bull market.
The question always is: how much should we as investors be willing to pay for earnings? Both the trailing and forward P/E ratio for the S&P 500 made new cycle highs last week, and are approaching the “mini-bubble” levels of 2021, when the Fed kept rates too low and for too long… x.com/i/web/status/1…
— Jurrien Timmer (@TimmerFidelity)
6:52 PM • Oct 30, 2024
“While the P/E ratio has no predicative qualities over the short-term, they do matter for the long term, as high valuations create a hurdle rate for future gains.
A Goldman Sachs paper made a splash last week in calling for a lost decade ahead of mere 3% annual returns. While my CAPE model below shows a better outcome, I agree with the direction of travel: 10-year CAGRs peaked in 2021 and are likely to revert back to trend (10%) and below in the coming years.”
charts
Are past cycles going to repeat themselves again?
The U.S. fiscal deficit and national debt are big concerns right now. And both candidates are promising more spending as far as the eye can see.
Is the solution higher taxes or less spending?
Data point: Over the last 10 years, US Federal Government Tax Revenue has increased 63% while Government Spending has increased 93%.
And finally, some parting wisdom
This week’s election has me thinking back on all the intense political debates I used to have with friends and family back in the day.
Honestly, no matter how many articles I read or facts I threw on the table, it always felt like hitting a wall, no one ever budged on their position. I wondered if changing someone’s mind was even possible.
Last year, I stumbled upon an incredible sci-fi writer, Iain M. Banks (thanks to an Elon Musk interview). And Banks in one of his novels finally explained what I felt about arguing politics in one perfect line:
“I strongly suspect the things people believe in are usually just what they instinctively feel is right; the excuses, the justifications, the things you're supposed to argue about, come later. They're the least important part of the belief.
That’s why you can destroy them, win an argument, prove the other person wrong, and still they believe what they did in the first place.”
Ian M. Banks
thanks for reading and have a great weekend,
Al Atencio 🦉
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