Switzer on Saturday

We were trumped but markets liked it

Founder and Publisher of the Switzer Report
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“Everything is coming up roses” is an old song by Ethel Merman, written for the musical Gypsy (luckily as a kid I avoided seeing this show!). It was the legendary singer’s signature bash-it-out-song and is a war cry for many forever bullish Americans, who stood up and splurged on stocks this week. The S&P 500 surged over 4.6%, while the Nasdaq wacked on close to 6%, with Tesla’s market cap topping US$ 1 trillion.

Elon Musk’s support for Donald Trump, which coincided with a good sales report for the carmaker, looked like one of the best punts of all time by a hi-tech entrepreneur!

The rally extended into Friday, clearly helped by the Fed’s rate cut of 0.25% on Thursday, which was another “coming up roses” event for investors in the US. Unfortunately, the total US market excitement hasn’t been shared globally, with our market up only 2.17% for the week. Gold had the worst week in five months as the Trump victory is seen as a problem for interest rate cuts and this has led to gains for the greenback. Both these developments weren’t expected until the Trump win, with the magnitude of that victory giving the looming President more power than was factored in by market and political analysts.

After a week like this one, the old cliché “Only in America!” makes even more sense.

Reinforcing this story of optimism US-style were September quarter earnings that are nearly complete. With 90% of S&P500 companies having reported, 75% of results have surprised on the upside, which is just below the norm of 76%. This is a pretty good showing, given the economy has copped 11 rate rises. They were bigger than ours, which numbered 13 but ours were smaller in total.

By the way, Nvidia is yet to report, and AMP’s Shane Oliver observed that “the final earnings growth number should come in around 7% year on year, which is still good, but down from 11.6% year on year in the June quarter.”

Not surprisingly, the Dow topped 44,000 for the first time ever and the S&P 500 beat the 6000 level, though they didn’t hold those milestones. Meanwhile, the VIX or fear index actually fell 1.64% on Friday to a low 14.95. And the five-day chart of the measure of market nervousness in the US, with President Trump to takeover in the USA in January, says it all.

Look at the fall in fear — it was 34% over the week! As I said previously, “Only in America.”

But let’s end this assessment of this week’s Trump trade with some measured analysis from Barclays strategist Venu Krishna, who sent this to clients: “Equities are eager to price in Trump’s domestic growth policies (via small caps) and hopes for easier regulation relative to the Biden administration. “Whether these moves are sustainable remains to be seen; momentum is extending lofty gains as ‘winners keep winning’, and the sharp post-Election Day moves have pushed major gauges near (or into, in the case of [Russell 2000]) technically overbought territory”.

Like it or not, global markets and economies are in the hands of Donald Trump. Even though I maintain my bullishness for stocks going into 2025, this very unusual guy does add more uncertainty to the equations I factor in when working out how I’ll invest and then what views/forecasts I’ll share with you.

History tells us the Yanks love saying, “God bless America!” And both Kamala Harris and Joe Biden trotted this out this week as they came across as good losers. However, given the trickier investing road ahead, I do have to call out for some ‘heavenly’ help and make this call “God bless us investors in a Donald Trump world!”

To the local story and beggars can’t be choosers. Given we do track Wall Street, and our interest rate cut scenario isn’t as good as the Yanks, our 2.2% gain for the week, taking the S&P/ASX 200 index up to 8295.1, was actually the best since the middle of August.

The stocks story was helped by positive expectations about more Chinese stimulus coming, which makes even more sense with Beijing eyeing off the Trump threat. Clearly, this helped our miners, with BHP up 1% to $43.40 and Rio rising 1.4% to $123.11.

Let’s look at the stars and strugglers for the week:

The Stars…

  1. Liontown Resources up 5.7% to $0.84.
  2. CBA up 5.05% to $149.32 — this can’t last!
  3. Neuren Pharmaceuticals spiked 35.49% to $16.57 on strong sales.
  4. Bluescope rose 8.8% to $22.26 on a UBS buy rating and a stronger US should be a plus.
  5. Computershare up 8.68% to $28.81 on its US exposure and Trump win.
  6. Johns Lyng Group put on 8.22% to $4.08 on hurricanes in the US and Trump!

The Strugglers…

  1. Domain Holdings lost 11.11% despite a good report to $2.68.
  2. Bellevue Gold was off 9.78% to $1.43 as Trump’s tariffs de-glittered gold!
  3. Boss Energy gave up 5.03% to $3.21.
  4. Domino’s Pizza was down 9.16% with its CEO’s exit.

What I liked

  1. The market reaction to the Trump win!
  2. ANZ job ads rose by 0.3% in October but are down by 15.8% over the year (see the chart below), which shows that some moderation in employment growth is likely.
  3. The Fed cutting the official rate by 0.25% on Thursday and markets are pricing in another 3 rate cuts over the next 12 months which is a slow easing cycle.
  4. This from AMP economist Diana Mousina: “There are no implications to Australian monetary policy right now as a result of the Trump presidency. Inflation is being driven by “home grown” services inflation which are not impacted by changes to US politics”.
  5. The US services ISM index rose to 56.
  6. The Chinese Caixin services PMI improved in October to 52 (from 50.3 last month), another sign of a stabilisation in growth.
  7. The Bank of England met this week and cut the policy rate by 0.25% to 4.75%, which takes total easing to 0.50% in this cycle.

What I didn’t like

  1. The clean sweep for the Republicans. Stocks do better with a divided Congress!
  2. The potential for Trump tariffs to hit China, global trade, inflation reduction and the course of lower interest rates.
  3. US factory orders fell by 0.5%.
  4. The RBA’s Statement on Monetary Policy said our GDP growth was revised down, partly reflecting a slower pick-up in consumer spending. The RBA expected stronger pick up in consumption growth in September quarter.

We’ve been Trumped

Donald Trump will bring both positives and negatives to investing with some companies bound to win and others to lose. His decisions on tariffs and what he does with China will be impactful on our stock prices. The safe way to invest with Donald will be with overall market indexes that should do OK. But when it comes to individual companies, we’ll have to do our homework. We will do our homework on your behalf, but we’ll still have to deal with the potential curve balls that a President Trump is good at throwing.

Donald will make our investing life much harder, but he also makes The Switzer Report even more relevant.

“God bless America and us too!”

 

Switzer This Week

Switzer Investing TV

  • SwitzerTV Investing: Will a Trump victory help or hurt stocks? Meet Ryan Quinn of WQG and WCMQ which was up over 31% in the year to September and have returned over 13% p.a. since inception. How come?
  • BOOM DOOM ZOOM!: Peter Switzer & Paul Rickard answer your questions on MQG, SUN, WOW & more

Switzer Report

Switzer Daily

The Week Ahead

Top Stocks — how they fared

Most Shorted Stocks

ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short, which could suggest investors are expecting the price to come down. The table shows how this has changed compared to the week before 

 

Quote of the Week

LA Times on what the Trump Win means for stocks: “A second Trump presidential term is expected to bring significant policy changes favorable to big business, including lower corporate taxes and less regulation. Top regulators at agencies such as the Securities and Exchange Commission and the Federal Trade Commission are likely to be replaced, easing the path for more mergers and acquisitions.”

Here’s a market player’s view — Lucinda Guthrie, head of financial data company Mergermarket in New York: “While Trump’s policy on tariffs and trade could bring volatility, the promise of deregulation and a more activist-friendly SEC might encourage dealmaking and shareholder activism in multiple sectors.”

 

Chart of the Week

 

Disclaimer

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.