hello my friends today is November 9th and this is Markets weekly what a week in markets right so many big things happening both in markets and in the world most notably of course we saw the S&P 500 surge past 6,000 although closing the week a little bit below as many of you know last December when the S&P 500 was trading comfortably below 5,000 when people all over the place were crying for recession I said that we would have a tremendous year in thep 500 and gave a 6,000 Target so permit me now to gloat a
little bit okay now um of course at that time I didn't know that we would actually get 6,000 I just knew based on my judgment on the financial system how the world works that we would have a tremendous year and it has been a tremendous year in June again having a little bit more clarity it's seem like the only way we would get to 6,000 was through a trump Victory that's what we got and we are at 6,000 um so today we're only going to talk about one topic and it's a big topic and that
is what this all means because frankly it seems like the country is going to change and the world will be as well now before we proceed further I want to note that some of you are not not happy with the outcome of the election and I understand that but I will also note that I saw heading into the final stretches of the election vice president Harris just running around and just comparing her political opponent to historical mass murders and selling all sorts of things that are not true so if you are feeling upset or apprehensive
about the outcome remember that we already had president Trump for four years everything was fine and a lot of the things that you heard are simply not true uh for example one of the most egregious examples of this is what's commonly called the fine people hoax which uh has been said by Obama by Biden and by Harris which basically they they tell everyone that uh Trump called uh Nazis and bad people to be very fine people uh the truth is that never happened in fact that's the complete opposite of what Trump said now the context
is that a few years ago there was a lot of commotion in Charlottesville uh Trump gone on Sage and said they were fine people on both sides noting that of course in any group of people you have a lot of commotion a lot of chaos you don't really know what's happening some of the people were really just Earnest protesters but then he immediately said this and you had people and I'm not talking about the neo-nazis and the white nationalists because they should be condemned totally but you ad many people in that group other than neo-nazis
and white nationalists okay and the Press has treated them absolutely unfairly so as you can see very clearly Trump openly strongly condemned uh the the Nazis and the white supremacists and so forth so if you believe that and if you heard that you know you were lied to and I would also add that during Trump's first term tremendous amounts of people were saying this guy is a Russ asan and so forth said that for years but then we had an independent Inspector General take a look and he found no evidence of that so again a
lot of the things that people are most afraid of when it comes to Trump are just based on hoaxes okay with that being said uh let's continue with our program so the elections outcomes was really uh unequivocal if you look at a map you can see that uh Trump won the Electoral College won the popular vote and if you look at the quote unquote swing states that many people were mentioning uh you know things like Pennsylvania Nevada Arizona and so forth Trump won all of the Swing States it was a very very clear election carried
the Senate and although we don't have the house results so far it looks highly likely that the Republicans will also take the house now all this means that there is a strong popular mandate for Trump to carry out his agenda and that agenda is very very different from uh the agenda of the prior Administration and so that is really shaking markets looking at Price action in the past week well first we'll see that equities obviously going to the Moon doing tremendously well uh in particular you can see Tesla up almost 30% this week looking at
currencies you see the dollar um just strengthening massively against uh other developed Market uh currencies looking at rates we did see kind of a jump in the 10year yield after the election that's retraced a bit and interestingly we saw gold sell off so what to make from all this price action I think the way that I'm going about going about explaining this is first we'll talk about Trump's foreign policy and then domestic policy and explain price action through that now starting with foreign policy the big big change that that Trump is proposing is of course
the liberal use of tariffs now during the campaign period the tariffs were being built as some kind of national sales tax it would raise costs and so forth now that's again political rhetoric totally nonsense you can actually hear uh TR hear Trump explain this himself in his Bloomberg interview he did a few weeks ago America at the moment has $3 trillion worth of imports you're going to add tariffs to every single one of them that is going to push up the cost for all those people who want to buy foreign Goods what's going simple mathematics
president Trump it's not yeah it is but not the way you figure it I was always very good at mathematics let me tell you you're saying 3 trillion those trillion worth of they don't have to pay and if by the the higher the Tariff the more likely it is to have them come into the higher the Tariff the more you're going to put on the value of that P those goods the higher people are going to have to pay in shops ready the higher the Tariff the more likely it is that the company will come
into the United States and build a factory in the United States so it doesn't have to pay the Tariff that will take that would take many so basically what Trump is saying that the tariffs are going to be a negotiating tool he wants companies to build factories in America and create jobs for Americans if the countries don't do this I mean he's going to put tariffs on there not small tariffs but really really big tariffs so they have no choice but to uh move here now this is kind of already scaring some people uh the
European Union notably Ursa verion president of the European uh Community gave gave a speech saying that you know maybe we could buy more uh us oil and gas so again this is already having some outcomes more broadly speaking if you were like me and you studied economics in school you would have gone through countless uh economics classes telling you that trade is good free trade is good you know and it is good but the good benefits are unevenly distributed if you can just uh look back a little bit you can see that in this free
trade period millions and millions of Americans lost their jobs or you can look across the sea to China China does not practice free trade right they sell a lot of stuff to the US but if you want to sell stuff into China not as easy not as easy you really have to have some kind of joint partnership or some kind of approval and over the past few decades this policy not at all free trade has done tremendously well in China they really really pulled hundreds of millions of people out of poverty so this free trade
Dogma this is really not the whole picture and what Trump is trying to do is to try to change this entire free trade apparatus such that it could be more beneficial to American workers now to be clear this is going to be a you know a bumpy ride other countri could retaliate there could be a lot of commotion that was certainly the case uh the first time around when Trump did his trade deals but ultimately though through that process we did get to renegotiate the NAFTA deal in North America and of course we did get
some concessions on trade with China now that being said this is going to be messy we already know that uh Trump rehired Robert Li eer to run his trade policy and Robert light Eiser this time around seems to also be fonded of um maybe some currency policy in this toolkit as well so we'll see how that develops but this trade policy goes a long way in explaining the Dollar's reaction now if you put big tariffs on other countries like China like Europe it's going to be bad for their currencies um many countries let's say Germany
or China have a big industrial policy that is geared towards selling Goods to other countries and the US is the largest consumer Market in the world as we all know Americans buy stuff buy lots of stuff and they when they run out of money they borrow money to buy more stuff and because the US is such a large consumer Market uh that is what gives Trump leverage to do these negotiations but at the moment the European Union not doing so well when it comes to their economy and China neither so if they were to put
tariffs on Europe and China that suggests weaker economies for them and for other Inu that export to the us and that would force a monetary policy response such that their Central Bank would have to be a bit more doish and you actually see that in pricing as well Trump pricing suggests more rate cuts from the ECB again widening the interest rate differential strengthens the dollar and you can also think further that maybe it would lead to more fiscal stimulus in China as well I don't know but again this is this whole whole big uh chess
board where there are a lot of moving in pieces we only see what we see right now in the future we'll have more insight as we see what the other players do and As Trump uh picks his cabinet out now another thing that has to do with foreign policy of course is war now Trump during his presidency didn't start any wars uh he's been very vocal about ending the war in Ukraine and um I would think wants to have more uh a more stable Middle East and you know immediately afterwards his election it seems like
there was a bit less of a geopolitical premium in markets you saw gold selling off and it seems like oil reacted negatively as well so a lot of the conflict in Ukraine is possible because the Western Powers continue to finance it now Trump has been very open he doesn't want to do this anymore and so I would consider that that conflict to be settled again you may not like how it's settled but it is going to be settled in the Middle East um Trump seems to be has a history of standing strong against for Israel
against other neighboring countries so maybe uh the overpowering uh the overwheling power of the United States would also deter uh other actors in the Middle East so maybe we have more stability there in any case on another note on oil it's possible that you know Trump could put on sanctions on uh Iranian oil and that could decrease the supply of global oil uh that it counterbalance the otherwise pro-drilling aspect of the Trump agenda so we don't know a lot of unknowns here but I think this is what explains uh both the dollar strength and when
it comes to um foreign rates uh reaction in markets and of course gold as well now moving on to the domestic agenda now I think what really stands out for Trump is immigration so that is kind of a huge issue that Trump has Ed on to ever since his uh candidacy several years ago now the American public obviously don't like massive illegal immigration now this is true I think uh broadly speaking many countries in the western world are unhappy about immigration policy um Trump has said that maybe he's oh first off of course he wants
to seal the Border less illegal immigration I think that's going to be done uh whether or not he's going to deport all the tens of millions of people that have come here I think that's a lot harder to do but uh the priority of course would be as he's mentioned before to deport illegal immigrants that have committed crimes now the the the the policy that he's mentioned before that I heard on the all-in podcast was that he would like uh to give the right to work to foreigners who come to the US and graduate from
us universities or at least some of them so it's so sad when we lose people from Harvard MIT from the greater schools and lesser schools that are phenomenal schools also and what I wanted to do and I would have done this but then we had to solve the covid problem because that came in and you know sort of dominated for a little while as you perhaps know but what I want to do and what I will do is you graduate from a college I think you should get automatically as part of your diploma a green
card to be able to stay in this country and that includes junior colleges too anybody graduates from College you go in there for two years or four years if you graduate or you get a doctorate degree from a college you should be able to stay in this country that Sugg just not an end to migration but a change in the composition so maybe we would have more high-skilled migrants enter the US and fewer low skilled migrants uh overall this would suggest some inflationary pressure on labor again uh you know that that's a hard thing to
say because if you have higher wages that could translate into a wage price spiral where you have let's say companies forced to raise their prices because they have to pay their workers and so you get into this inflationary spiral another possibility is simply that you have higher wages and companies simply have narrower profit margins so companies eat the cost and that's actually how what's happening in the European Union right now it's possible it could happen here it really depends on a competition policy whether or not we have a better enforcement of antitrust or the market
becomes um just more competitive so that is not clear either although I think broadly speaking uh the market thinks of Trump's policies as inflationary uh not just because of the labor front but also because of fiscal spending through tax cuts now the Trump tax cuts that he enacted during his first term were set to expire next year uh with Trump caring Congress it's almost certainly to renewed and Trump has mentioned that he would like to further cut corporate income taxes cutting taxes is not good for the deficit right so obviously it increases the supply of
treasuries but also it's very stimulative to growth you're essentially uh giving more money to to the private sector private sector will spend that and so you're going to have more growth and inflation so that's I think explains both the higher interest rates in part in large part actually because the market is pricing in a more hawkish fed uh so we're going to have fewer rate Cuts next year so another big part of the Trump's domestic agenda is just deregulation again less regulation is in general considered to be more growth friendly um so and stock market
likes that so we can see possibly more growth as well so what else did we U okay so that of course explains equities so all in all I think this is a very very positive picture for the economy so far and so that's why you have such a strong reaction in markets now going forward I'm I'm less clear if this would be sustained because when we were going about this huge Transformations you have a lot of interest groups that you have to go through people who benefit by how the world works right now may not
like losing their special benefits and Trump is promising to be a disruptive candidate you have for example RFK wanting to do big reform in how foreign Affair cicles are run you have Elon Musk wanting to cut the deficit to well reduce government spending maybe efficiencies by having fewer government workers to try to improve how this works so right now it's just foggy um but so far the Market's verdict is very powerful and as we get more clarity going forward we can think about what this actually means now to reiterate though now that we've hit my
S&P Target I am much much more cautious at the moment and I think that we may be in the process of carving out a a multi-year top okay so that's all I prepared for today thanks so much for tuning in remember to like And subscribe and um yeah check out my blog if you're interested in hearing more thoughts on uh markets talk to you all next week
