Making sense of the markets this week: November 17, 2024

The Trump effect

A few things have changed in the world since I last wrote the Making Sense of the Markets column a few weeks ago. Republican control of all three levels of the US federal government (assuming current vote counting patterns) sent stocks soaring. This week, the S&P 500 neared 6,000 for the first time, the Dow Jones Industrial Average hit 44,000, and even our TSX hit an all-time high of 25,000. It turns out that investors really like the idea of ​​an uncontested election, the lack of insurgency in the White House, and the promise of big tax cuts.

There are many opinions about how the promises of president-elect Donald J. Trump will affect markets around the world. With the caveat that many of these campaign promises won’t be fully realized, here’s a brief look at the most prominent market stories to come out of the election:

• With Trump as president, Bitcoin could continue to go through the roof due to crazy trading behavior. Cryptocurrency lobbyists have paid more than USD $119 million to ensure that Trump will be leading their products “on the moon.” They have their hopes bribes the bet will pay off.
• Despite making the electric cars Trump has said he hates, Tesla (TLSA/NASDAQ) shares will rise on the basis that CEO Elon Musk has Trump’s ear. Tesla’s share price has risen more than 30% since election day.
• The stock of Trump Media & Technology Group Corp. (DJT/NASDAQ) continued its rise as the official meme stock of 2024. The company is also valued at over USD$6 billion, despite not having a profit-or any real production system. profit in the future.

Many Canadian small and medium-sized businesses are expressing concern about the 10% to 20% tariff rate, promised by Trump, against all goods produced outside the United States. However, I wouldn’t bet on Canadian oil and natural gas being a price target, considering that Trump’s National Security Adviser is married to the vice president of TC Energy Corp.

One could also argue the net effect of the deficit in the US economy (full of heavily taxed consumers buying Canadian goods) would balance the threat of tariffs, as far as the Canadian economy goes. But the same case cannot be made in many Asian countries.

Andrew Tilton, Goldman’s chief economist for Asia-Pacific, recently highlighted Korea, Taiwan and Vietnam as the countries most likely to be affected, in addition to Trump’s favorite target for tariffs, China.

I personally think that if there’s one thing we’ve learned from elections around the world this year, it’s that most people don’t know how inflation works—and that they really, really hate the cost of things right now. That strong voter sentiment could put an inflation-backed ceiling on how far Trump can push his tax agenda.

While the word “tariff” may be Trump’s favorite word, “inflation” is unlikely to be on his radar. The Tax Policy Center and the Peterson Institute for International Economics predict that the average US family would pay about $3,000 more per year if it imposed a 20% global tariff, combined with a 60% tariff on Chinese goods.

Of course, it is worth pointing out that all this information may be included in market prices in the days following the election. So if you’re planning to make money on the “Trump Trade,” you’re probably late to the party.