America Votes, Markets React: What the U.S. Election Means for Your Investments
Alpesh B Patel OBE
Asset Management. Great Investments Programme. 18 Books, Bloomberg TV alum & FT Columnist, BBC Paper Reviewer; Fmr Visiting Fellow, Oxford Uni. Multi-TEDx. UK Govt Dealmaker. alpeshpatel.com/links Proud son of NHS nurse.
Does money buy happiness?
While it is overly simplistic to say that money directly "buys" happiness, studies have shown a strong correlation between income and happiness.?
Higher income is associated with greater life satisfaction and fewer negative emotions like stress and sadness. However, the relationship is more nuanced than a simple equation.
Is there a limit to how much money can increase happiness?
Previously, research by Kahneman and Deaton (2010) suggested that emotional well-being plateaued at an income of $75,000 per year. However, more recent studies using larger datasets have challenged this finding.?
Killingsworth (2021) found that both experienced well-being and life evaluation continued to increase with income even beyond $75,000 per year, with no evidence of a plateau.
Does everyone experience the same relationship between income and happiness?
No, the relationship between income and happiness varies from person to person. Individual factors like the importance a person places on money and their belief that money equates to success can significantly influence how much their happiness is affected by their income.
Why does the importance of money matter in this relationship?
People who place a high value on money tend to experience a stronger positive correlation between income and happiness.?
Conversely, those who place less importance on money show a weaker link. It appears that aligning your financial goals with your values can lead to greater well-being.
Are there other factors besides income that contribute to happiness?
Absolutely. A multitude of factors influence happiness levels. Genetics, personality traits, social relationships, health, and engaging in meaningful activities all contribute to a person's overall well-being.?
While income plays a role, it's important to cultivate a holistic approach to happiness.
Does poverty have a specific impact on well-being?
Yes, research indicates that poverty can exacerbate the negative effects of adverse circumstances. For example, individuals experiencing financial hardship are more likely to report sadness, worry, and stress when facing challenging situations compared to their higher-income counterparts.
Can intentional activities increase happiness even if my income doesn't change?
Yes, intentional activities like practicing gratitude, nurturing relationships, pursuing meaningful goals, and engaging in acts of kindness can significantly boost happiness levels regardless of income.?
Focusing on personal growth and positive actions can have a profound impact on well-being.
Podcast here: https://open.spotify.com/episode/6RHDGdSeVYnuDgZDw0mFED
The absolute greatest gift my parents gave me, the absolute wildest most amazing thing I ever got and have kept to this day and will pass to my son and everyone I meet is the absolute total love of learning and understanding and knowledge.
The new nominee to be Director of National Intelligence. So so proud of Tulsi. Just nominated by President Elect Trump to that role. And she is the proudest Vaishnav too.
The Director of National Intelligence (DNI) holds a higher position than the Director of the Central Intelligence Agency (CIA).
The DNI oversees the entire U.S. Intelligence Community, which includes the CIA as well as 17 other agencies, such as the FBI, NSA, and Defense Intelligence Agency. The DNI reports directly to the President of the United States. The CIA Director, while still influential will be reporting to Tulsi.
Being at LinkedIn HQ is fun. I’ve just witnessed some outstanding AI companies here and mind is blown. More to follow.
He described the US as "the European 'emergency contact number' for the past century". The Indian Foreign Sec said "Europe's Problems are the world's problems, but the world's problems don't seem to be Europe's problems." US India thinking more aligned. The media will understand the Government of India a lot more now. Think American Government if you're confused.
I’ve bought more Doge Coin. I used Revolut (not an advert). No leverage. Crypto is highly risky. I think US Government will issue crypto.
Budget deficit will be cut too and US national debt if these two deliver.MAGA coin will come from Government. It will fund deficit reduction and border walls.
Very excited for the American experiment. It was an experiment in Democracy. Now an experiment in entrepreneurship.
You unleash the greatest entrepreneurial nation onto its on Government. How do you become the greatest President since 1945? You cut the national debt not just the deficit.
Climb on board baby. Trump 2 is a bigger sequel.
1. Technology Performance: The tech sector, led by major companies like Apple, Microsoft, Amazon, and Alphabet, was the top-performing sector during Trump's term, significantly boosting the S&P 500.
Drivers: Continued innovation, rapid growth in cloud computing, and the dominance of FAANG stocks (Facebook, Apple, Amazon, Netflix, Google) propelled the sector. Tax cuts helped major corporations increase share buybacks, enhancing investor returns.
Regulation: Trump’s administration was relatively hands-off regarding tech regulation, creating an environment favourable for tech growth. The sector saw heightened scrutiny in the latter half of his term, yet regulatory action remained limited.
2. Financials Performance: Financial stocks, including major banks like JPMorgan Chase, Goldman Sachs, and Bank of America, performed well, particularly in the early years of Trump’s term.
Drivers: Trump's administration implemented a rollback of some Dodd-Frank regulations, reducing compliance costs for banks and easing restrictions on lending. Additionally, the 2017 Tax Cuts and Jobs Act lowered the corporate tax rate, boosting profits for banks and financial services companies.
3. Industrials Performance: The industrial sector, which includes companies involved in construction, defense, and manufacturing, performed solidly under Trump, particularly pre-COVID.
Drivers: Trump's focus on infrastructure spending, defense contracts, and domestic manufacturing stimulated growth in this sector. Trade policies aimed at promoting "America First" manufacturing benefitted some industrial companies, though tariffs on imports, particularly from China, created uncertainty and mixed results for multinational industrials.
Defense Stocks: Aerospace and defense companies, such as Boeing, Lockheed Martin, and Raytheon, saw increased federal spending and strong performance, boosted by rising defense budgets.
4. Healthcare Performance: The healthcare sector saw substantial growth, with contributions from pharmaceutical companies, biotech, and health insurers.
Drivers: Drug and biotech companies, including Pfizer and Moderna, experienced growth due to deregulation efforts that aimed to speed up drug approvals. Trump's push to lower drug prices created mixed impacts on pharmaceutical stocks, but overall, the sector thrived due to advancements in medical technology, demographic trends, and a strong focus on vaccine production during the COVID-19 pandemic.
5. Consumer Discretionary Performance: Consumer discretionary stocks, particularly those in e-commerce, travel, and retail, were among the strongest performers.
Drivers: Tax cuts and a strong labor market during the pre-COVID years increased disposable income, boosting spending in areas like luxury goods, automobiles, and entertainment. Amazon led the sector’s growth, benefiting from e-commerce trends and logistical efficiencies.
Impact of COVID-19: COVID-19 dramatically shifted consumer habits, with e-commerce, home improvement, and streaming companies (e.g., Amazon, Home Depot, Netflix) experiencing a surge, even as traditional retail and travel-related stocks suffered.
6. Energy (pre-COVID)Performance: Energy was a volatile sector during Trump’s term, with strong initial performance that was later hurt by the 2020 oil price collapse.
Drivers: Trump’s focus on energy independence, deregulation, and support for fossil fuel industries (e.g., rolling back environmental restrictions and promoting drilling) initially boosted energy stocks. However, the sector was hit hard by the 2020 oil price crash caused by a drop in global demand due to the pandemic, severely impacting companies like ExxonMobil and Chevron.
Renewable Energy: While Trump was not supportive of renewables, the long-term trend towards green energy meant that renewables continued to see investor interest and growth.
7. Real Estate
Performance:?The real estate sector experienced moderate growth during Trump’s term, driven by low-interest rates and a strong pre-COVID economy.
Drivers:?Trump’s tax reforms, including changes to the treatment of real estate investments, benefitted property developers and REITs. Low-interest rates made borrowing cheaper, boosting construction and property purchases.
Impact of COVID-19:?While commercial real estate suffered during the pandemic, residential markets surged as remote work trends increased demand for suburban housing.
8. Retail
Performance:?Retail showed a mix of winners and losers, with e-commerce dominating and traditional brick-and-mortar stores struggling.
Drivers:?Tax cuts increased disposable income, benefiting consumer spending. The rise of online shopping platforms like Amazon redefined retail dynamics. Large discount chains like Walmart thrived due to their extensive e-commerce infrastructure and adaptability during COVID-19.
Impact of COVID-19:?The pandemic accelerated the decline of traditional retail while bolstering online sales and delivery services.
9. Utilities
Performance:?Utilities delivered steady returns, benefiting from low-interest rates and their reputation as a defensive sector.
Drivers:?Trump’s support for energy independence indirectly benefitted utilities, particularly those relying on natural gas. Despite deregulation efforts, investor interest in clean energy utilities continued to grow due to the shift toward renewable energy.
10. Communication Services
Performance:?The communication services sector saw robust growth, driven by companies like Facebook, Alphabet, and Netflix.
Drivers:?The increasing reliance on digital communication and entertainment during Trump’s term fuelled the growth of social media, streaming, and telecom giants. Tax cuts and a hands-off regulatory approach further supported profitability.
Impact of COVID-19:?Lockdowns during the pandemic led to a surge in demand for streaming services and digital communication platforms, solidifying the sector’s growth trajectory.
You’re not paying attention and not getting it. Musk is putting the most talented executives into Government to get sh*t done. The way his companies do. Johnson had Dominic Cummings. (Hah). This is Trump and Musk.
The US economy will be on fire (in a good way). I wrote in the Financial Times in my first column in 1999 I am buying only US stocks. Hell yes even more so now.
The job of my Campaign for a Million to teach a million people to invest better to add a million to their pensions over their lifetimes just got a hell of a lot easier. www.campaignforamillion.com
British people listen up. Don’t get left behind in your pensions by missing out on the US markets because your dimwit wealth manager and IFA is too busy shovelling crappy fund managers at you in exchange for kickbacks.
The US economy under Trump and Musk is going to be driven by huge growth other economies can only dream of.
Economic Shifts Under Trump: Key Market Impacts and Investment Strategies
The re-election of Donald Trump presents a range of implications for U.S. stocks and economic policies, both encouraging and challenging.
Analysts from Morgan Stanley, Goldman Sachs, and J.P. Morgan have offered insights into the potential market impacts of Trump's policies, which include corporate tax reforms, deregulation, and tariffs, all of which could reshape sectors like energy, manufacturing, and technology.
Key Economic Policies and Their Stock Market Implications
Trump’s potential economic policies, as described by Goldman Sachs, suggest a focus on lower corporate taxes and a reduction in regulations for key sectors like energy and manufacturing.
These changes could create favourable conditions for certain sectors, especially financial services and traditional energy industries.
Goldman Sachs emphasises that investors should expect increased market volatility, particularly as these policies may initially yield sharp sectoral gains but also create potential risks in areas like trade.
In addition, Morgan Stanley discusses the potential for a surge in energy stocks due to policies promoting energy independence. With potential easing of restrictions on energy production and a shift from renewables, traditional energy stocks could see gains.
However, sectors reliant on international trade, like technology and manufacturing, may face headwinds as Trump’s tariffs on imported goods could strain supply chains and inflate production costs.
Tariffs, Inflation, and Wage Pressures
According to J.P. Morgan, Trump's stance on tariffs could introduce inflationary pressures, raising the costs of goods in the U.S. economy. This move could ultimately increase prices for consumers, putting upward pressure on wages.
J.P. Morgan anticipates that higher wage growth, particularly in industries where labor markets are tight, could prompt the Federal Reserve to reassess its approach to inflation. Investors may thus need to closely monitor the 10-year Treasury yield, which could signal how markets are pricing in the interplay of tariffs and wage inflation.
Moreover, Trump's proposed tariff policies may prompt a stronger push for U.S. manufacturing, as companies look to avoid added import costs. While this could boost domestic manufacturing stocks, it also risks increasing inflation and affecting profit margins due to higher production costs.
Corporate Tax Reforms and Stock Gains
Another significant pillar of Trump’s proposed economic strategy includes corporate tax cuts. Goldman Sachs analysts suggest that such cuts could benefit corporate earnings, leading to a potential boost in stock prices. Lower corporate taxes could free up capital for reinvestment, dividends, or stock buybacks, all of which may drive stock valuations higher.
Morgan Stanley notes that financials and industrials, as well as companies with substantial domestic revenue, stand to gain the most from these tax changes. Yet, the scale of these tax cuts could further deepen the federal deficit, leading some economists to express caution about?the sustainability of this policy without offsetting revenue measures.
Financial Deregulation and Sectoral Impacts
Trump’s approach to financial deregulation would likely lift certain constraints from the banking sector. A relaxation of post-2008 financial regulations could enable banks to engage in riskier, higher-yielding investments. J.P. Morgan highlights that while this might boost short-term profits for financial institutions, the deregulation might also increase the potential for market instability in the long term.
Investors should approach this sector with cautious optimism, as deregulation could lead to both short-term gains in financial stocks and a potential resurgence in banking sector risks. According to Morgan Stanley, deregulation could strengthen profits in the short term but may raise concerns about financial stability down the line.
Partisanship and Investor Sentiment
Investor sentiment has often shown fluctuations based on the political landscape. Partisan shifts in investment decisions are a noted phenomenon, with mutual fund managers and individual investors displaying increased optimism when their preferred party is in power.
J.P. Morgan notes that, during Trump’s previous term, Republican-leaning fund managers and retail investors tended to allocate more to equities than Democratic counterparts, who tended to remain cautious. However, the potential for highly partisan-driven investments poses risks for portfolios.?
Partisan sentiments can lead investors to overlook objective market signals, which J.P. Morgan warns could have adverse effects during volatile periods, as seen during the COVID-19 pandemic. Investors are advised to adopt a disciplined, data-driven approach to avoid letting political biases impact their portfolio decisions.
Conclusion
The re-election of Donald Trump could bring substantial shifts in economic policies, with wide-ranging impacts on U.S. equities. While certain sectors like energy, financials, and manufacturing might benefit from tax cuts and deregulation, the risks associated with tariffs, inflation, and deficit expansion warrant careful monitoring.
Investors are encouraged to remain vigilant, especially as the political climate could amplify market volatility. Embracing a balanced approach may help to mitigate the risks of partisanship-driven market actions, allowing investors to adapt to the dynamic economic landscape shaped by these policies.
For further reading:
Another Trump Trade ( more to come). Consider the types of people who put money into Crypto. Lots of Republicans? Heck yes. Are they happier and more excited about America and crypto under Trump. Heck yes. All investing is risky. Not advice. But looks a one way bet.
As he would say himself “no other President has created so much wealth in such a short space of time ever. No politician anywhere, ever.”
The great thing about spin is it triggers reaction. And reaction triggers the algorithm. And that gets attention. When the legend is bigger than the facts. Print the legend. (From forthcoming movie The Man Who Shot Liberty Trump)
There is always a bigger fish. Don't complain about it, ask how you can get in on it.Those are two quotes from a dear friend. Funny. For me, from age 12, 'getting in on it' has been about riding the coat tails of the most innovative hard working people. How? So I read about Karl Marx's Das Kapital (I din't read it, I read about it). And the answer was clear - Being a capitalist of course - owning shares in their companies.
First three episodes of my Podcast. Part of my Campaign for a Million to teach a million people to add a million to their pensions over their lifetimes. Listen to the Podcast on Spotify and here: https://creators.spotify.com/pod/show/alpesh--patel/episodes/JP-Morgan-Wealth-Managements-Market-Guide-e2qm958
Best Trump Stock Trades
The re-election of Donald Trump as U.S. President has prompted investors to reassess their portfolios, anticipating policy shifts that could influence various sectors. Historically, Trump's administration has favoured deregulation, tax cuts, and a robust stance on defense and energy, leading to potential opportunities in specific industries.
1. Defense Sector
Trump's commitment to bolstering national security and increasing defense spending positions defense contractors favourably.
2. Energy Sector
Trump's pro-fossil fuel policies, including deregulation and expanded drilling, could boost traditional energy companies.
3. Financial Sector
Deregulation and corporate tax cuts under Trump's administration may favour large financial institutions.
4. Industrial and Manufacturing Sector
Trump's focus on domestic manufacturing and infrastructure development could benefit companies in these sectors.
5. Technology Sector
While Trump's policies may present challenges for some tech companies, certain areas like artificial intelligence (AI) could receive support.
6. Cryptocurrency and Blockchain
Trump's administration has shown interest in positioning the U.S. as a leader in cryptocurrency and blockchain technologies.
7. Private Prisons
Policies on immigration and law enforcement could impact private prison operators.
8. Infrastructure and Construction
Trump's emphasis on revitalising American infrastructure suggests potential growth in the construction and materials sectors.
9. Pharmaceuticals and Biotechnology
The administration's stance on healthcare policies may influence pharmaceutical companies, particularly those involved in drug pricing and innovation.
10. Transportation and Logistics
Policies favouring domestic manufacturing and trade adjustments could impact transportation and logistics companies.
11. Consumer Goods and Retail
Tax reforms and economic policies affecting consumer spending may impact retail and consumer goods companies.
12. Automotive Industry
Trade policies and manufacturing incentives could influence the automotive sector.
13. Financial Services
Deregulation and tax policies may favour financial institutions, potentially enhancing profitability.
On the Great Investments Programme we will give the all-important insights on how to allocate risk capital effectively, where to set exit points for gains and losses, and how to structure your investment timelines. Visit www.alpeshpatel.com/links
Credit where credit's due. Once as a young pupil barrister, at 7 Stone Buildings, Lincoln's Inn, I had done a lot of research for a trial determining the powers of a Minister and to what extent they stemmed from the Crown.
The case law was archaic and often in French. Eventually I showed the barrister in the case before the trial one case which would have short-circuited the whole trial. He initially dismissed it as we walked to the Royal Courts of Justice.
Then just before going into court he asked me to get copies of the case for the judge, and otherside. As the trial proceeded, he pulled out the case. The judge commended him.
The barrister I was working with paused and said, and I still recall it, 'it's thanks to my pupil'. The judge was impressed. It's the best traditions of the Bar. (Yes I walked on air the rest of the day. The barrister who I was training under is now a Court of Appeal judge. I can see why.)
Huuuge.
Briefing Doc: UK Pension Funds Underperforming Index Trackers
A significant majority of UK pension funds are underperforming simple FTSE All Share index tracker funds, raising concerns about the value and effectiveness of active management in this sector. This underperformance has serious implications for savers' retirement outcomes.
Key Ideas and Facts:
Widespread Underperformance:?91% of UK pension funds underperformed the FTSE All Share tracker over the past decade. (Sources: IFA Magazine, Pensions Age, AJ Bell)
Magnitude of Underperformance:?72% of funds lagged the tracker by over 10%, with 37% underperforming by over 20%. (Sources: IFA Magazine, Pensions Age)
Big Names Implicated:?Funds from prominent providers like Clerical Medical, Phoenix, Scottish Widows, and Standard Life are among the under performers. (Source: IFA Magazine)
Impact on Retirement Savings:?Underperformance translates into significantly smaller pension pots for savers upon retirement. (Sources: IFA Magazine, Pensions Age)
"Inertia Tax":?Closed pension funds, no longer accepting new business, may suffer from neglect as providers focus on newer products, leaving investors in these funds to bear the brunt of poor performance. (Source: IFA Magazine)
Historical Context:?The underperformance can be partially attributed to the proliferation of "closet tracker" funds, established when trackers were less common, charging active fees while closely mirroring index performance. (Sources: IFA Magazine, Pensions Age)
High Charges:?Older pension plans often carry higher charges set before investment and platform costs declined, further eroding returns. (Source: IFA Magazine)
Stakeholder Pension Legacy:?The popularity of Stakeholder pensions in the early 2000s, driven partly by regulatory pressures, has left many savers with outdated and underperforming schemes. (Source: IFA Magazine)
Consumer Duty Implications:?The FCA's Consumer Duty regulation, applied to closed books from July 2024, is expected to push providers to improve performance in these funds, but its effectiveness remains to be seen. (Source: IFA Magazine)
Actionable Steps:?Investors are urged to assess their pension fund performance, compare charges, consider valuable guarantees, and explore options like transferring to modern SIPP or workplace pension schemes with better potential. (Source: IFA Magazine)
Active vs. Passive Debate:?While acknowledging the advantages of index trackers, experts highlight that not all passive funds are equal and investors still face choices regarding benchmarks and fees. (Source: AJ Bell)
Important Quotes:
Laith Khalaf, AJ Bell:?"It’s pretty shocking that nine out of ten pension funds investing in the UK haven’t beaten a simple tracker fund over the last ten years... This doesn’t look like a market which is serving consumers well." (Source: IFA Magazine)
Laith Khalaf, AJ Bell:?"Index performance minus high fees is an equation which leads to negative outcomes for pension savers." (Source: IFA Magazine)
Phoenix Group Annual Report:?"...the Group’s view is that the risk exposure around the Duty is elevated whilst the supervisory approach matures, and closed products are reviewed against the Duty’s principles, most notably fair value, ahead of the end-July 2024 deadline." (Source: IFA Magazine)
Jason Hollands, Bestinvest:?“In a bull market when most funds rise in value with the upward tide, investing can seem all too easy but tougher times are a period to reflect on your approach." (Source: Business Insider)
Further Points:
The report by Bestinvest (Business Insider) focuses on consistently underperforming funds, highlighting the long-term issues plaguing some specific funds.
AJ Bell’s analysis reveals that active fund managers, in general, are struggling to outperform passive funds, with only a third achieving this feat in the first half of 2024 and over the past decade. (Source: AJ Bell)
S&P500. A = 15%. B=25%. Positive Return in 12 months = 40%.
If things aren't going well. Watch this. Hugh Laurie apologises for his appearance and explains things aren't going well. Then...well life turns on a dime sometimes as the Americans would say. I don't know how many times you will win. But I do know you lose a hundred percent of the shots you don't take. Take your shot
Does the budget mean higher mortgage rates for longer?
Alpesh Patel OBE
Visit www.alpeshpatel.com/shares?for more and see www.alpeshpatel.com/links
Retired
1 周Business unfriendly policies and the perception thereof can only mean more interest in international diversification. Unless the London FTSE gets its act together more large cap firms will just upsticks and go to look to more friendly business environments or sell out to private equity firms. The ship is taking on water!
Trade Support and Client Relationship Management
1 周The Spotify link for the trump trades section doesn't work.