11 Nov 11th November 2024
Weekly Index Movement
| S&P500 | +4.7% |
| Nasdaq | +5.4% |
| Aussie All Ords | +2.1% |
The decisive U.S. election outcome cleared a source of uncertainty for the markets, with stocks posting their best ever post-election rally. Republicans should end with a clean sweep of the presidency, Senate, and the House. This means they should be able to put in place just about whatever they want. The market expects tax cuts, less regulation, tariffs on foreign goods and a rollback of Medicare.
Betting and financial markets were predicting a Trump win, but the clean sweep was something of a surprise. It just confirms what I have always thought. Voters don’t actually deliver a yes vote. They really deliver a no vote. Voters have struggled with inflation for years and want a change so they do the only thing they can and change the political party. It’s not they they wanted Trump. It’s that they blame the Democrats for their present financial position and want it to change.
Of course, the cost of living is outside political control and it wasn’t the Democrats fault. It happened everywhere in the world. But voters don’t understand this. All they see is the price of food higher than they remember.
Back to what’s important.
Taking a look at what moved last week makes things clear about where you want to focus.
For a start forget about any other global market. Concentrate on the US. Forget commodities and bonds. In US stocks, small caps, both value and growth, were the best place to be. In large caps it was Financials, Industrials, Energy and Tech. Consumer Discretionary has Tesla (TSLA) to thank for its big gain since the stock was up 30% this week and has re-joined the “Trillion Dollar Market Cap” club.
Given Elon Musk’s very vocal campaign to help President Trump win re-election, it should come as no surprise that Tesla (TSLA) reacted positively to Trump’s victory. Back in late April, TSLA was down more than 40% year-to-date, but it has now rallied more than 120% off its lows and is up 28% YTD. As shown below, TSLA shares are up 30% since Tuesday’s close before that night’s election results.
Another insane move this week has been in a little-known closed-end fund called the Destiny Tech 100 (DXYZ). DXYZ has surged 170% since Tuesday’s close, which puts it 465% above its net asset value (NAV)! Why, you may ask? Well, DXYZ owns stakes in private companies, the biggest of those being SpaceX. On Destiny’s website, it shows SpaceX making up just over 37% of the fund. I recommend reading this Morningstar article to learn more about DXYZ. This is NOT something to mess around with unless you have extensive knowledge about closed-end funds and how they work. But, if you want exposure to SpaceX before it goes public, then this is the way to do it.
Other fun moves I spotted this week came from Private Jails. That’s right. You can invest in a private jail if you like! Only in America!
Geo Group (GEO) and Corecivic (CXW) have seen huge buying since Tuesday, with GEO up 67% and CXW up 64%. These two companies make their money housing prisoners and illegal aliens for local, state, and federal agencies. With crime, immigration, and the border on top of President-elect Trump’s to-do list, investors are betting that GEO and CXW stand to benefit.
The other big news of the week was interest rate decisions in Australia and the US.
Australia kept rates on hold which was a surprise to no-one. Anyone who thought they would cut clearly doesn’t know the difference between headline and core inflation. Australian core inflation is still 3.5% and unemployment is 4.1%. With inflation above target and a tight labour market, there is no chance they cut. The hopes of a cut in February are also delusionary. It will take a long time to bring inflation down because our Government is spending so hard. Police got a pay rise today. 40% over 4 years. I won’t get into whether they deserve or not, but that extra money needs to be funded somehow and those receiving it will spend it.
There will be no cuts in Australia for a long time yet. Maybe not even next year.
The Fed did cut rates by 25bps but also signalled that any further reductions will need to see a softening of the economy. Their core inflation is 3.3% and although labour conditions are weaker than they have been, they are still at the strong end of the pre-Covid scale. Further cuts are not guaranteed.
The good news is the market has adjusted for this and so it is not something we need to concern ourselves with.
Sometimes I think we make things too hard with investing.
- The US economy is strong
- The Fed has a bias to cutting rates
- Election results should benefit stocks
What else do you need to know?
Get out there and make sure you are 100% long. We are in the middle of a Bull Market and it is going to continue.
Warning
Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account and might not be suitable for you.