What…a…week! Investors learned who the next president will be earlier, then got a Federal Reserve rate cut dumped in their laps later. Meanwhile, stocks and cryptocurrencies soared, while interest rates and the U.S. dollar spiked. Check out this trio of articles from MoneyShow expert contributors, each of which contains trading ideas and profit recommendations for this post-election, post-rate-cut market.
Fawad Razaqzada Trading Candles
Many investors may have missed the post-election rally and will be looking to buy on the dips, as investors expect that a Trump policy agenda favoring lower taxes and less regulation may support corporate profits. The S&P 500 jumped 2.5% Wednesday, which was its best post-election day in history.
Some 86 names in the S&P 500 hit new all-time highs, making them among the top stock gainers post-election. The Nasdaq 100 hit a new record after rising 2.7% on the session. But there are a few issues that might come into focus now that the dust is settling down.
Markets were caught off guard by just how quickly the results arrived – not in days, as expected, but in mere hours. With the Senate promptly called for the Republicans, the initial market response began almost immediately in early Asian trading. The Trump Administration, widely regarded as pro-deregulation and keen on tax cuts, sent a clear message that it’s likely to support corporate profitability.
That said, much of the buying has likely already taken place before the election and now in the immediate aftermath. What is more, with the US election risks behind us and a surprisingly straightforward outcome, Trump’s policy agenda remains on hold until 2025 – potentially even late into that year. So, there is plenty of time for the market to focus on other factors driving the markets.
One thing to watch out for is concerns over tariffs, which might hurt sentiment in China and Europe. It could also weigh on sentiment on Wall Street. Another big issue that comes to mind for the markets – and Trump – is the Federal debt limit. This will be reinstated on Jan. 2.
With rising yields, government borrowing at this pace looks unsustainable. How Trump addresses this issue with his plans to borrow even more and cut taxes remains to be seen. Could it trigger a ratings downgrade? This is a big risk that could undermine equities despite all the hype.
Meanwhile, with tech earnings mostly out of the way, there will be even fewer catalysts to drive the markets higher. Investors will be questioning whether the AI hype will continue to power revenue growth for tech companies, or whether we will see a slowdown.
Jim Woods The Deep Woods
In a remarkable political feat, former President Donald Trump is now once again President-elect Donald Trump. Trump has now become only the second president to win two non-consecutive terms (the other was Grover Cleveland). So, what is my favorite market segment given the election outcome?
I know many of my readers (likely most) are overjoyed at the election result. I also know that many are disappointed. I know this, because so many have texted and emailed me expressing jubilance, while so many others have vented their anguish. It goes to show that my readers hold a variety of opinions, and that they take their convictions seriously.
(Editor’s Note: Jim Woods is speaking at the 2025 MoneyShow Las Vegas, which runs Feb. 17-19. Click HERE to register)
As far as markets are concerned, well, the feeling is unequivocally in the jubilance camp. Stocks roared to new, all-time highs “the morning after,” with several notable election winners surging in anticipation of a return to Trump’s policies, which are seen as pro-growth, anti-regulation, and anti-tax.
Certainly, stocks are likely to continue to do very well. And as it is regardless of politics, stocks with the strongest earnings growth, strongest share price performance, most bullish technical patterns, and the most-bullish “NewsQ,” as I call it, will lead the way. I also think that despite a post-election selloff, gold is likely to continue doing well. Its store-of-value status, and its proven resilience as a must-have form of “wealth insurance,” holds true regardless of politics.
However, I think my biggest election winner is crypto. Trump is very pro-cryptocurrency, embracing the asset class while heavily courting the crypto community. I think this is a great thing, because crypto is an unstoppable force driven by demand and technology that cannot be denied or ignored.
Try as they may, and certainly SEC Chairman Gary Gensler has done just that, Bitcoin, Ethereum, Solana, etc., haven’t been stopped, because smart investors know this is the next big asset class for capturing alpha. For example, in November 2020, when Biden was elected, Bitcoin traded at $13,677. Today, four years and another administration-elect later, it trades at nearly $75,000. That’s a massive gain of nearly 450%!
I suspect that no matter how well your stock portfolio or your gold or silver holdings performed, they didn’t perform that well over the past four years.
Yes, that ride has been volatile. And yes, it’s not for all of your money. Yet for those who want to be on the right side of investing history, I think you need to embrace cryptocurrencies, and you need to do so now, as President Trump will almost certainly be an advocate.
Tim Plaehn The Dividend Hunter
I recently added the FolioBeyond Alternative Income and Interest Rate Hedge ETF (RISR) to the Fixed Income Investments category of the Dividend Hunter portfolio. I think the ETF’s name says it all, notes Tim Plaehn.
A traditional bond fund owns a portfolio that matches the fund’s stated investment characteristics. These can include types of bonds, such as Treasuries or corporate bonds, and a targeted maturity range. Most bond funds (BulletShares are an exception) constantly buy and sell bonds to maintain the targeted maturity range. The funds do not hold bonds until maturity.
(Editor’s Note: Tim Plaehn is speaking at the 2025 MoneyShow Las Vegas, which runs Feb. 17-19. Click HERE to register)
The returns of bond ETFs are more driven by changes in interest rates than by dividend yields. When interest rates go down, bond prices increase, and a bond ETF will post positive total returns. When interest rates go up, bond prices and bond ETF share prices fall — and they can drop dramatically.
A duration metric tells us how much a bond fund’s share price will change with changing interest rates. It gives the percentage change in a fund’s value for a one-percentage point change in rates. So, a bond ETF with a duration of 10 years will lose 10% of its value with a one-percentage point increase in interest rates.
The RISR portfolio consists of agency mortgage-backed, interest-only (MBS IOs) securities, and Treasuries. MBS IO securities make up 98% of the portfolio and are what distinguish RISR from traditional bond ETFs.
MBS IOs have a NEGATIVE duration. That means if interest rates go up, the value of these securities will increase. They are a strong hedge against rising rates in fixed-income investments. MBS IO securities have a positive carry of 6% to 9% per year, providing cash for the RISR dividends.
Bottom line? RISR is a hedge against higher interest rates. I can envision several scenarios in which rates at the long end of the yield curve move higher, possibly much higher. The most likely scenario is that investors could decide to stop funding the US government debt load unless they’re paid more.
Recommended Action: Buy RISR.
Mike Larson MoneyShow
The fight for the White House is over. The fight for your portfolio is just beginning. Now that Donald Trump has won the 2024 presidential election, and Republicans may end up controlling both branches of Congress, markets are reacting swiftly and strongly – and new leaders (and laggards) are emerging.
In this week’s MoneyShow MoneyMasters Podcast, Jim Bianco,president and macro strategist at Bianco Research, and Jeff Hirsch, editor-in-chief of The Stock Trader’s Almanac and Almanac Investor, explain what is happening, why it’s happening, and what you can do to adapt and profit as an investor. You can watch the episode here.
We start with a discussion of the just-completed election, including why we saw an effective “red sweep,” how betting markets “got things right” ahead of pollsters, and what that means for future election cycles. The conversation next covers the massive moves in equities, Treasury yields, the US dollar, gold, and Bitcoin – as well as why select market sectors and small cap stocks are cheering a Trump win.
Jeff weighs in on what past presidential election cycles say about the likelihood of this post-election rally continuing into 2025, while Jim brings up the biggest fly in the ointment that could derail the bullish train. We then pivot to Fed policy and what to expect at the next few meetings…how the epic battle between Chairman Jay Powell and the bond market vigilantes will unfold…and what fixed-income strategies make the most sense for investors. Jeff also shares some of his favorite sectors and stocks, as well as which asset class he’s most bullish on in a new Trump administration.
Lastly, Jim and Jeff preview they’ll cover at the 2024 MoneyShow Masters Symposium Sarasota, scheduled for Dec. 5-7 at the Hyatt Regency Sarasota. Click here to register.
Read the full article here
