November 18, 2024
America goes red, markets go green
Dear Reader,
I wrote to you recently about an oft-overlooked Austrian economist who believed that every stock purchase was not just a bid for personal profit, but a vote cast in the economic democracy of the free market.
If that is so, then the days since Donald Trump won the United States presidential election have shown us very clearly what the market wants.
This is how the biggest financial markets in the world are looking as of this morning (performance for year to date):
S&P 500: +23.7%
NASDAQ: +26.5%
Bitcoin: +145%
Say what you want about Trump and the incoming administration; you simply cannot argue his victory has not been good for stocks.
This week, The Benchmark takes a look not just at what’s happened in the weeks since this latest election, but at what happened after Trump’s previous win — and what some of the market’s most influential voices are calling for in 2025 and beyond.
The ‘Trump Bump’ 2.0
History doesn’t repeat, yet it often rhymes.
In 2016, Trump won the U.S. election for the first time.
Fewer people expected it then than this time.
But the stock market conditions were similar.
The S&P 500 was making new all-time highs. As you can see in the chart below, it took off to even higher ones post-election.
The 2016 Trump Bump
This time, it’s a similar setup.
Stocks had made new all-time highs in the run-up to this election, and now appear to be off to the races — and making the late-2016 rally look trivial by comparison given the stock market’s performance since 2016.
The S&P 500 crossed 6,000 points for the first time.
The NASDAQ crossed 19,000 for the first time.
And, love it or hate it, Bitcoin has gone ballistic, up 32% in the past month alone.
‘Larger than 2016’ — JP Morgan
JP Morgan Chase & Co.’s head of US market intelligence wrote in a note to clients last week ‘I expect 2024 returns to be larger than 2016’.
The bank expected the big tech stocks to push the markets even higher, with financial stocks outperforming the rest of the S&P 500 for the remainder of 2024.
This post-election rally, they said, would be even stronger than in 2016, due to three main factors:
✅ Corporate tax cut promises
✅ Expectations around deregulation
✅ Increased infrastructure spending
Investors seem to feel more confident about a Trump presidency than they did in 2016. The market will tell us, in time, how these bets play out.
Crypto storms the senate & house
As I write this, Bitcoin has just hit $90,000 for the first time.
The last time the original cryptocurrency went this crazy, it topped out at about $70,000 in late 2021.
The crypto world has made its Trump vote very clear.
The industry reportedly spent more than $100 million on backing crypto-friendly candidates this election — a sign the once fringe financial-tech movement is maturing and finding more traditional ways to establish itself in the mainstream.
Not only has Trump promised to put America at the centre of the digital asset industry, to appoint more crypto-friendly regulators, and indicated he wants to create a national strategic Bitcoin reserve…
But the senate and house representatives the crypto world backed will shortly be displacing less favourable counterparts in the country’s halls of power.
But, there’s two sides to every story – especially when things get extreme.
Buffett keeping (lots of) powder dry
Warren Buffett’s Berkshire Hathaway is one of the biggest investors in the world.
But it’s worth noting that the company has never kept so much cash out of the market as it’s currently holding back.
They have about $325 billion in cash and treasury bills on their balance sheet — money they believe is wiser kept out of the stock market, even as it melts faces with new high after new high in the wake of the election result.
The Wall Street Journal notes that this amount of money could buy all but the most valuable 25 or so listed companies in the U.S.
While stocks have been climbing since late 2022, Berkshire Hathaway has been growing its cash stash:
Long-term investors know there’s few better veteran investors to pay attention to when markets get extreme.
Dawn of a golden era? Or unsustainable rally?
Tom Lee from independent financial research firm, Fundstrat, thinks there’s more to this market rally than a short-lived post-election party.
He’s raised his S&P 500 target to 7,000 for 2025 — about another 16% higher from current levels.
Lee points to several factors:
✅ Resilient corporate earnings
✅ Expectations of further Fed rate cuts
✅ The potential for increased fiscal stimulus under Trump
The kicker here, is that the market is doing something it’s only done twice in the last 80 years:
It’s up over 20% year-to-date and sitting at all-time highs in November.
The last two times this happened? 1954 and 1958.
The market finished the year higher both times.
Quote of the Week
‘As a bull market continues, almost anything you buy goes up. It makes you feel that investing in stocks is a very easy and safe and that you’re a financial genius.’
— Ron Chernow
That’s it for The Benchmark this week.
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Invest in knowledge,
Thom
Editor, The Benchmark
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All information contained in The Benchmark and on navexa.io is for education and informational purposes only. It is not intended as a substitute for professional financial or tax advice. The Benchmark and any contributors to The Benchmark are not financial professionals, and are not aware of your personal financial circumstances.
