The markets exploded with activity after Donald Trump’s unexpected victory over Kamala Harris in the presidential election. The Dow Jones rocketed past 1,500 points – a surge I haven’t seen since the post-COVID recovery. The Russell 2000 jumped 5.8%, while the S&P 500 marked its best post-election performance ever with a 2.5% gain.
Treasury yields did their own dance, with the 10-year settling at new levels as investors digested the election results. I watched bond traders scramble to reposition their portfolios – reminded me of my early days on the trading floor when cell phones were the size of bricks.
How Trump Can Fix The Economy & Inflation
The U.S. faces a critical inflation threat as Trump returns to office, stemming from the $6 trillion expansion in money supply between 2020-2022. With inflation stubbornly above 3% despite moderate oil prices, historic decisive action is required.
Just Look at the chart below from Truflation that tracks the real-time cost of goods, and you will clearly see that high inflation is still heard. Meanwhile, the Fed is lowering rates!
Core Solutions
Spending Reduction
Federal spending drives approximately 42% of inflationary pressures. Each percentage point reduction in government spending relative to GDP could lower inflation by 0.5 percentage points. Priority areas include:
- Defense and nondefense program caps
- Medicare payment reform
- Social Security adjustments
- Streamlined discretionary spending
Growth Enhancement
Economic growth must exceed 4% annually to effectively combat inflation. This requires:
- Capital gains tax cuts to below 15%
- Broad income tax reductions
- Elimination of 25% of business regulations
- Reduced startup costs through deregulation
Trade Policy Considerations
Trump’s proposed 60% tariff on Chinese imports and 10-20% on other countries poses inflation risks. (Trump 100% understands this and is using tariffs as leverage to get US companies better deals.) Every 1% tariff increase generates $30 billion in revenue but reduces trade volume by 2-3%. A more moderate approach targeting strategic imports at 5% could balance revenue and protection goals.
Implementation Strategy
Despite the very serious threat of inflation and out-of-control government spending we are facing, I am very confident that the Trump administration is committed to attacking head-on. Many of the public statements are in alignment with addressing inflation head-on, but it won’t be an easy task. The administration must coordinate fiscal and monetary policy while:
- Cutting $2 trillion from federal spending over four years
- Maintaining essential services
- Protecting vulnerable populations through targeted transfers
- Avoiding price controls
- Fostering private sector growth
Historical evidence suggests this combined approach of deregulation, targeted tax cuts, and spending reduction can stimulate growth while containing inflation. Success requires careful balance and swift, decisive action, given current spending levels of $6.5 trillion annually.
US Market Highlights
The Federal Reserve delivered another quarter-point rate cut, bringing rates to 4.50-4.75%. Watching Jerome Powell navigate questions about the election impact on monetary policy was like watching a master chess player – every word carefully chosen, every pause deliberate.
Here’s a market tidbit that made me chuckle: Berkshire Hathaway’s current cash pile of $325 billion is larger than the GDP of Ireland. Warren Buffett sitting on that much cash makes me think he knows something we don’t – he usually does.
The Dow Jones reshuffle brought some drama, with NVIDIA and Sherwin-Williams replacing Intel and Dow Inc. These index changes always remind me of high school popularity contests, just with billion-dollar consequences.
Global Highlights
China rolled out an ambitious $1.4 trillion plan to handle local debt – that’s like using a fire hose to water a garden. Meanwhile, the Bank of England cut rates but kept their stance cautious, showing all the enthusiasm of a teenager at a family dinner.
The real eye-opener was in the EV market. Tesla’s China sales dropped 5.3%, while BYD soared 66.2%. Even Elon Musk’s zero-interest financing couldn’t compete with local competition. Sometimes even the biggest players have to learn new dance steps.
Commodities & Crypto Corner
Oil markets played out like a geopolitical thriller this week. Brent crude settled at $74.40 and WTI at $70.90. The Israel-Iran situation had traders more nervous than a long-tailed cat in a room full of rocking chairs.
Bitcoin nearly touched its all-time high at $73,600. The crypto market’s been more volatile than my first cup of morning coffee, with Bitcoin ETFs pulling in a staggering $2.2 billion this week. That’s the kind of money that makes traditional bankers sit up straight.
Gold held steady at $2,753, while copper maintained its ground at $9,500 per ton. Industrial metals stayed calm despite the political storm – sometimes the boring investments are the smart ones.
Calendar
Next week’s calendar is packed tighter than a New York subway car. Here’s what I’m watching:
Economic Data:
- October CPI (Wednesday)
- Retail Sales Report (Friday)
- Industrial Production Numbers
- Housing Market Updates
Major Earnings:
- Walt Disney (Entertainment heavyweight)
- Cisco (Tech infrastructure bellwether)
- Home Depot (Housing market indicator)
- Applied Materials (Semiconductor sector pulse)
- Shopify (E-commerce trends)
The S&P 500 breaking 6,000 and the Dow crossing 44,000 feel like milestones worth celebrating, but I’ve been around long enough to know markets never move in straight lines. The “Trump trade” enthusiasm might continue, but smart investors keep their powder dry.
I’ll be watching these developments with the same intensity I had when I started in this business – though with considerably more gray hair now. Remember, in markets, as in life, it’s not about predicting every move, but about being prepared for whatever comes next.
Until next week, keep your investment strategy solid and your risk management stronger. And maybe keep some cash handy – Buffett usually knows what he’s doing.
