Monthly Market Recap: Trumpmania 2.0
05 December 2024
Read Time 3 MIN
Overview
November marked a transformative moment for U.S. markets as Donald Trump returned to the White House, igniting what many are calling 'Trump Trade 2.0.' His approach is characterized by an aggressive dismantling of entrenched systems, effectively taking a flamethrower to the establishment. The appointments of high-profile disruptors, such as Elon Musk and Vivek Ramaswamy, signal his intent to upend traditional governance and foster innovation.
Markets responded swiftly, with U.S. equities surging amid optimism about pro-growth policies. Not all investments reacted favorably as real assets like gold and commodities struggled under a strong dollar, weaker demand expectations and diminishing uncertainty. Global equities and bonds saw more muted or mixed performance as the world adjusted to expectations of change under the new administration.
Digital assets rallied based on Donald Trump’s pro-Bitcoin stance. Lyn Alden, one of my favorite investment strategists, posted this picture on X recently:
Source: tradingeconomics.com as of 12/4/2024. Past performance is not indicative of future results.
Bitcoin was doubted at $1, mocked at $100, dismissed at $1k, declared dead at $10k, and pronounced ‘too late’ at $30k. Here we are now above $100k and the haters are still gonna hate.
Not to be outdone by Lyn Alden, John Ferrick, one of my favorite VanEck salespeople, uses this picture as his digital background for Zoom calls:
Bitcoin Has Been the Best Performing Asset Class in 8 Out of the Past 11 Years
Source: Morningstar, as of 9/30/2024. Bitcoin is represented by MarketVector Bitcoin PR USD; US Equities are represented by the S&P 500 TR USD; Gold is represented by the S&P GSCI Gold Spot; Emerging Markets is represented by Fidelity Emerging Markets TR; Real Estate is represented by the NASDAQ Global Real Estate TR USD; US Bonds are represented by Bloomberg US Aggregate Bond USD; Treasuries are represented by the Bloomberg Aggregate Bond Treasury TR USD; Commodities are represented by the Bloomberg Commodity TR USD.
The simplicity of this chart demonstrates a wildly powerful point: Bitcoin is consistently the top-performing asset, and we believe it needs to be owned.
Stocks
U.S. equities rallied in November, driven by expectations of tax cuts, deregulation, and fiscal stimulus. The S&P 500 Index gained 5.87%, with small-cap growth stocks, as measured by the Russell 2000 Growth Index, surging 12.26%. Small cap leadership reflects optimism around domestic-focused policies.
The S&P 500 Index is now trading at a price-to-earnings ratio of over 27. That is significantly above the long-term (30-year) average of 19.7. Over the past 30 years, valuations have only been this high 7.4% percent of the time. The S&P 500 Index is now up nearly 30% year-to-date and 57% over the past two-years. The acceleration of the stock market rally into already stretched valuations leaves it vulnerable to a near-term correction.
Elon Musk’s appointment to co-lead the newly formed Department of Government Efficiency (DOGE) amplified investor sentiment. Tesla, emblematic of Musk’s disruptive vision, surged 38% during the month, underscoring the renewed investor confidence in sectors tied to innovation and infrastructure. Musk’s leadership, paired with biotech entrepreneur Vivek Ramaswamy, highlights the administration’s focus on fostering efficiency and forward-thinking industries.
Global equities, however, faced challenges. The MSCI EAFE Index, representing developed international markets, declined 0.55%, while the MSCI Emerging Markets Index fell 3.58%. These declines were driven by a strengthening dollar, trade uncertainty, and slower growth expectations outside the U.S.
Bonds
Fixed income markets posted modest gains as investors adjusted to the shifting economic outlook. The Bloomberg U.S. Aggregate Bond Index rose 1.09%, benefiting from stable Federal Reserve expectations despite concerns about fiscal stimulus driving inflation. High-yield and corporate bonds outperformed government debt, reflecting increased risk appetite as markets anticipated pro-business policies under the Trump administration.
Real Assets
Real assets struggled in November, with gold and commodities facing headwinds. Gold declined 3.67%, pressured by a strong dollar and broad reduction in uncertainty, which diminished its appeal as a hedge.
Commodities were mixed. WTI Crude oil edged down 1.82%, reflecting subdued expectations for global demand despite and increased probability of a cease fire in the Middle East. Copper, often viewed as an economic bellwether, fell sharply by 5.98%, signaling concerns about slowing international growth and potential trade disruptions tied to protectionist U.S. policies.
Digital Assets
Digital assets were among the strongest performers in November, with Bitcoin soaring 39%. This surge reflects growing optimism that the Trump administration will adopt a more favorable stance toward cryptocurrencies. President-elect Trump has signaled plans to remove the crypto-critical SEC Chair Gary Gensler and replace him with a leader more supportive of innovation in digital finance.
The market is also anticipating regulatory easing for cryptocurrency listings, exchanges, and mining operations, which could create a more hospitable environment for the sector. Speculation about a potential national Bitcoin reserve further underscores the administration’s openness to integrating digital assets into its financial strategy. These developments have bolstered Bitcoin’s role as both a hedge against inflation and a strategic asset.
Final Thought
November’s market activity reflected the dramatic shift in political and economic expectations tied to Trump’s return to power. His governance style—marked by bold appointments like Musk and Ramaswamy and a commitment to dismantling entrenched systems—has reshaped market dynamics.
With U.S.-centric assets and digital innovation poised to benefit, investors must remain vigilant in navigating a complex global landscape. As markets recalibrate to 'Trump Trade 2.0,' the focus will be on the administration’s ability to deliver on its promises and sustain momentum in an evolving economic environment. Balancing optimism with caution will be key as this new chapter unfolds.