Weekly Market Bites

end of week markets update

It’s been a good first couple of weeks in financial markets 🤑 

• The S&P 500 closed yesterday at an all time high for the first time this year

• Bitcoin continues to chop around $100 thousand

• International equities are participating in the stock rally as well

There is an age old markets indicator that says that “as January goes, so goes the rest of the year” so lets see if this month closes out strong.

Here’s a summary of the year so far:

1) TRUMP, TRUMP, and more TRUMP... That’s all I’ve been hearing this week! And I bet you have too.

So lets dive into the key economic and market policies he’s planning to purse; especially Scott Bessent’s (Treasury Secretary) “3-3-3 economic plan”, which lays out 3 major goals:

Energy: Grow energy production by 3 million barrels / day + streamline energy infrastructure projects

• 3 million barrels per day sounds big. But that’s like a 7% growth in production every year during his presidency, which is doable.

• Although, these days, companies in the oil patch are focusing more on returns to shareholders rather than going all-in like the "drill, baby, drill" era.

• Streamlining energy infrastructure projects → that's a tough one. Oil, gas, and electric transmission line projects take a long time to plan and build. And new additions have nearly stopped in recent years. Take a look below:

Economic Growth: 3% GDP growth through deregulation and pro-growth policies

• Trump's going big with a "10-to-1" rule: for every new regulation, 10 old ones gotta go 🔪 

• But, It can take 6-12 months just to change or get rid of a rule.

• During his first term, Trump won about 1/3 of the court battles over major rule changes. Even so, any progress on this front slows down the regulation machine.

Fiscal Deficit: Cut fiscal deficit to 3% of GDP.

• This is were it gets tricky. The deficit currently running around 7% of GDP, and Trump plans to extend tax cuts inaugurated during his first term. 

Success here relies on a bunch of moving parts happening together, to name a few:

• Higher economic growth

• Revenue from Tariffs applied to other countries (allies or adversaries) - or what he likes to call the creation of an “External Revenue Service”

• Cutting programs from Biden’s administration like Electric Vehicle credits, student loan forgiveness, food programs and more…

• “Drain the Swamp/DOGE” - cutting the federal workforce. Although people would be surprised to hear the federal bureaucracy has less fat than assumed “Federal employment of 3 million people is at its lowest level as a share of US employment in 85 years (~2%).” - JPM.

Trump's plans sound bold, but we'll have to wait and see how much of this actually gets done:

2) Immigration - There’s no way to talk about Trump and avoid this issue.

The data clearly shows that illegal immigration went up a lot under Biden, giving Trump a key advantage in the election.

For those interested, I think this 1-minute clip perfectly sums up the new administration's philosophy on immigration and its impact on the economy:

3) Let’s take a moment to look beyond the U.S. and see how individual country stock markets performed in 2024.

For a globally diversified investors exposure to these countries is usually bundled into Developed Market ETFs like EFA or Emerging Market like EEM, and rarely do we see individual results:

Wow Argentina! 🥳 💸 

It’s wild to think about, but the MAG-7 companies are as big as, or even bigger than - the entire stock markets of some major developed countries:

4) To finish our Donald extravaganza: TRUMP + Crypto

I've been writing a lot since last year about how the meme-coin craze is the hottest trend of this cycle.

And Trump’s surprise launch of a TRUMP meme-coin is the icing on the cake.

And crazily enough, the TRUMP coin was a “yuuge” success, briefly touching over $70 billion in value:

Love it or hate it. These are the times we live in - get used to it my friends.

We're at a point where even the speculative stock trader bros are so astonished by what's happening that they now see themselves as having a "traditional finance background." - gtfo 🤣 

charts

MAG-7 credit better than the US Government? 🙃 

China’s GDP no longer expected to surpass USA - at least anytime soon…

One big reason houses are more expensive in the U.S. today: They’re a lot bigger!

Today, nearly 50% of homes have four bedrooms, whereas back in the day, that number was under 25%.

I wonder what this development must be like in other parts of the world? 🤔 

And finally, some parting wisdom