We might as well tell you that last week was marked by the American election and a little by the FED. All records practically fell last week and we are still celebrating the advent of the extraordinary Donald Trump by making cryptos explode again this weekend. We seem to never be satisfied with this new presidency that is offered to us. As if Trump was going to solve all the problems without creating any new ones, without widening the deficit and without increasing the debt. Anyway, for the moment we are in a state of grace and unless we bet everything on alternative energies last week, everything seems to be going well.
Audio from November 11, 2024
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An almost normal week
The week that begins this morning is therefore an almost normal week. No election and no FED, it’s almost the holidays. However, we are going to start with a day of vacation, since this Monday morning is Veterans Day in the USA. The stock exchanges will be open, but the bond market will be closed. We should therefore not expect crazy volumes from our American friends. However, Europe will be open normally and that’s good because there will be work to make up for lost time, since we will still have to remember that the European markets have not experienced the same atmosphere as their counterparts Americans. The differential is even staggering, since comparing the performance of the S&P500 and the Eurostoxx, the difference over one week is almost 7% in performance.
It will still be necessary to remember that the S&P500 gained +4.6% over the week, +25.7% since the start of the year and 46% in 1 year and one week to be precise. 46% in 53 weeks surely constitutes a record somewhere, in any case it gives the impression that during the bubble of the year 2000 we were “almost” reasonable. We will also remember that for the same 53 weeks, the Nasdaq is up 50% and that its average PER is now 46.85. So 46.85 may not mean anything to you, but let’s still know that during the dot-com bubble we reached 38.6 and in 2007, when we realized that the price of American real estate could not go to heaven and that backing rotten loans to houses that do not exist cannot work forever, this same average PER of the Nasdaq was 34.2.
Trump’s miracle potion
Either way, the markets seem convinced that as soon as Trump is in power, we will return to the world of easy money, that rates will return to zero, that taxes will fall by 30% and that customs taxes will hit the economy and will therefore – in full – create millions of jobs – not to mention that with all the illegal immigrants who will return home by the first charter, we seem to believe that this will also create millions of jobs in addition to the millions created thanks to the revitalization of the economy. If so, in eight months, we will have to bring back the immigrants in question because there will no longer be enough labor, there will be so much work.
In short, to be frank with you, I think that we would not need a lot of time or reflection to find enough arguments to question this completely delusional “bull run” in which we are in, but it would not be useful to no avail since when the euphoria is there, we never manage to determine when the music will stop playing. However, we can largely try to become rational and ask ourselves the right questions, just look at the “OUTFLOWS” of recent weeks. If recent statistics are to be believed, $5 billion has flowed out of tech funds since the start of October – twice as much as at the start of the Bear Market in 2022 – and yet , at the same time, the S&P500 hit 6,000 for the first time last Friday. So how can the market rise without technology.
Expanding the investment zone
According to the same data that demonstrates the wave of selling in tech, we learn that since Trump’s election, the S&P Regional Banking ETF (KRE) has recorded an inflow of $1.3 billion, the largest ever recorded. . The financial sector ETF (the XLF), announced a collection of 1.6 billion dollars, the largest since 2016. Besides the mid-small-caps ETF, the IWM experienced a MASSIVE inflow of 3.9 billion dollars last Wednesday. This is the largest influx in 17 years.
In total, around $18 billion was added to ETFs after the election of Donald Trump, which is roughly 16 times more than the daily average since the start of the year if we are to believe the figures from Bloomberg. It should therefore be remembered that for the first time this year, the S&P and the rest of the indices were driven upwards without the help of technology stocks. It therefore remains to be seen how long this broadening rally will be able to last, counting on financials and mid-small-caps. We can only hope that the magical effect of the new and old President will continue to work for a long time, because if we take into account the fact of the vertical rise of recent days, at the slightest doubt the awakening could be prove difficult.
The start of the week in Asia
To start this week we will therefore start slowly since the American volumes will not be there, but we will already start talking about another subject: the Chinese stimulus. Investors were largely disappointed by the announcement made by the Chinese government of a debt “swap” program of around $1,400 billion, in order to improve the finances of local governments. The problem remains the absence of direct fiscal stimulus measures and targeted measures aimed at improving the housing market and personal consumption. This left investors hungry, especially as data released over the weekend showed Chinese deflation continued into October. This morning the Nikkei is therefore slightly down, China is unchanged after opening lower and Hong Kong is down 1.9% to once again express the disappointment of an insufficient stimulus for the consumer.
In the wake of this “bad news”, the barrel of oil has fallen back below $70, since it no longer knows whether it should be happy to see the coming economic explosion promised by Trump, or whether it should worrying about the fact that the same Trump is going to drill like crazy to lower energy prices, or: being afraid of the fact that China will not restart as strong as expected with the insufficient stimulus that makes everyone squeal world. For the moment, the barrel is at $69.96, gold is at $2,676 and Bitcoin is flying towards $100,000, since this morning, the crypto is in full delirium. Bitcoin has broken $81,000 and Elon Musk’s Doge Coin is once again up 25%.
The news, what news?
As for today’s news, it’s very calm. It must be said that we are more concerned about Trump’s victory and most of the American financial media spent their long weekend concocting a list of what Trump “should do” to succeed in his presidency, from one point from a purely economic point of view. At the moment, we are not really convinced that these writings could interest him, but at least we give ourselves a little importance. Otherwise we will also note that everyone is convinced of one thing: Powell must stay until the end of his mandate. Which should actually happen, since firing him would be more or less illegal. It should also be remembered that the head of the Minneapolis FED, Neil Kashkari, believes that the plans for a violent increase in customs tariffs planned by Trump could bring back inflation. There is also Musk who officially reached a personal fortune of 300 billion dollars in the wake of the explosion of Tesla which has gained 30% since the election and which will have cost 5 billion dollars to the Hedge Funds which continue to remain “short” on the value.
And then, while the Americans struggle to control their euphoria, Germany continues to plunge into depression. The German Chancellor, Olaf Scholz, even proposed bringing forward the “vote of confidence” before the end of the year. Which suggests that Germany will experience new elections while the economy is sinking. The CPI figures which are expected tomorrow should confirm this. Moreover, speaking of inflation, it should also be remembered that in order to resume normal life after Donald Trump, we will also have the American CPI which will be published on Wednesday, while the PPI will be released on Thursday.
For the moment, American futures are indicated up by 0.2%, settling immediately above 6,000 points and I will see you tomorrow to take stock of this first session of the week which should be conspicuous by its absence of volume, while filling up with joy because Trump is still a good guy. Well, for a week.
See you tomorrow, if you want!
Thomas Veillet
Investir.ch
“Look for small companies that are already profitable and have proven that their concept can be replicated. Be suspicious of companies with growth rates of 50 to 100 percent a year.”
― Peter Lynch
