November 7, 2024 • 24 mins
The fight for the White House is over. The fight for your portfolio is just beginning. Now that Donald Trump has won the 2024 presidential election, and Republicans may end up controlling both branches of Congress, markets are reacting swiftly and strongly – and new leaders (and laggards) are emerging. In this week’s MoneyShow MoneyMasters Podcast, Jim Bianco, President and Macro Strategist at Bianco Research, and Jeff Hirsch, Editor-in-Chief of The Stock Trader’s Almanac and Almanac Investor, explain what is happening, why it’s happening, and what you can do to adapt and profit as an investor.
We start with a discussion of the just-completed election, including why we saw an effective “red sweep,” how betting markets “got things right” ahead of pollsters, and what that means for future election cycles. The conversation next covers the massive moves in equities, Treasury yields, the US dollar, gold, and Bitcoin – as well as why select market sectors and small cap stocks are cheering a Trump win. Jeff weighs in on what past presidential election cycles say about the likelihood of this post-election rally continuing into 2025, while Jim brings up the biggest fly in the ointment that could derail the bullish train.
We then pivot to Fed policy and what to expect at the next few meetings...how the epic battle between Chairman Jay Powell and the bond market vigilantes will unfold...and what fixed-income strategies make the most sense for investors. Jeff also shares some of his favorite sectors and stocks, as well as which asset class he’s most bullish on in a new Trump administration. Lastly, Jim and Jeff preview they’ll cover at the 2024 MoneyShow Masters Symposium Sarasota, scheduled for Dec. 5-7 at the Hyatt Regency Sarasota. Click here to register: https://sarasotamms.com/?scode=061246
We start with a discussion of the just-completed election, including why we saw an effective “red sweep,” how betting markets “got things right” ahead of pollsters, and what that means for future election cycles. The conversation next covers the massive moves in equities, Treasury yields, the US dollar, gold, and Bitcoin – as well as why select market sectors and small cap stocks are cheering a Trump win. Jeff weighs in on what past presidential election cycles say about the likelihood of this post-election rally continuing into 2025, while Jim brings up the biggest fly in the ointment that could derail the bullish train.
We then pivot to Fed policy and what to expect at the next few meetings...how the epic battle between Chairman Jay Powell and the bond market vigilantes will unfold...and what fixed-income strategies make the most sense for investors. Jeff also shares some of his favorite sectors and stocks, as well as which asset class he’s most bullish on in a new Trump administration. Lastly, Jim and Jeff preview they’ll cover at the 2024 MoneyShow Masters Symposium Sarasota, scheduled for Dec. 5-7 at the Hyatt Regency Sarasota. Click here to register: https://sarasotamms.com/?scode=061246
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Fight for the White House is over, but the fight
for your portfolio is just beginning. We now know Donald
Trump will take office in early twenty twenty five, that
Republicans will control the Senate, that the House could go
their way as well. That could lead to several new economic, geopolitical,
and market trends to the year ahead. More debt and
deficit spending, insurgence in inflation, big tax cuts, less regulation
(00:26):
in the financial sector, and cryptocurrency arena.
Speaker 2 (00:28):
Plus powerful market.
Speaker 1 (00:29):
Gains with news sectors possibly taking the lead. There's certainly
a ton to cover in this week's Money Show Money
Master's Podcast, so let's get to it. My guests today
are Jim Bianco, President and macro strategist at Bianco Research,
and Jeff Hirsch, editor in chief of the Stock Traders
Almanac and Almanac Investor.
Speaker 2 (00:46):
Gentlemen, how are you.
Speaker 3 (00:48):
Very good to ask you?
Speaker 1 (00:49):
Yeah, I'm glad you could be here, obviously, as we're
meeting an incredible amount of things going on in the
markets and with the elections, I just want to kind
of throw it out there, starting right from the top,
get your initial reactions on the election results and the
powerful market reactions we've seen as a result of that.
Speaker 4 (01:04):
The markets I think are looking at a Trump victory,
the Senate going Republican, potentially a red wave with the
House staying Republican, although at the time of recording that's
still an open question, but it's kind of leaning that
way as being very stimulative, tax cuts, deregulation, and maybe
(01:24):
even tariffs.
Speaker 3 (01:26):
And so we're.
Speaker 4 (01:27):
Looking at an economy wherever you thought the economy was yesterday,
that you should be upgrading your outlook for the economy today.
And that's why I think you're seeing two things happen
at the same time. And you're seeing a giant move
higher inequities, especially driven by small cap equities that are up.
You know, they arrest all five percent at one point today,
(01:49):
on the idea that you know, there's gonna be more
people buying stuff, there's to be more earnings, and you're
seeing a massive rise in yields. The thirty year yield
is up was up at one point two twenty six
basis points in the day, the most we've seen in
a single day since twenty twenty. On the idea that
this massive stimulus brings about with it a very real
risk of inflation at a time when the FED is
(02:12):
probably seemed to add to it by cutting interest rates
literally the day after we're going to record, and I
think the market's trying to tell the Fed that that's
a mistake, but they're not listening, and they're going to
do it anyway. So that's why you've seen this massive
move up and yields and up in stocks at the
same time.
Speaker 2 (02:28):
Jeff, how about your big picture thoughts there.
Speaker 5 (02:30):
I think the biggest win is that we have a
clear decision quickly. My biggest concern, and I know a
lot of the concern out there, was that this would
get drawn out. Pretty sure. We knew. I went to
bed a little early thinking I wouldn't have to you know,
we wouldn't get a decision, and I woke up, you know,
before dawn, like I do, and Harry kind of knew
(02:53):
that it was. I mean, as Jim said, you know,
pretty much a red wave. My data in the twenty
twenty five Vomanac shows that Republican congresses are what matter most.
The market combination of a Republican Congress and a Democratic
president averages about thirteen percent for down SMP about fifteen
point six for a NASDAQ. I think the deregulation is
(03:18):
what's driving the small caps, the promise for the more
ease of doing business, and in general, post election years
are better they than they know historically were where since
eighty five. It's the best year of the four year
cycle on average seventeen point two percent, but up eight
(03:39):
down two. I just I really think the decision is clear.
I'm concerned about the Fed tomorrow. I thought they should
have done a quarter. I'm not sure why they went
fifty to show off for something. Maybe that will with
all this inflation, every stuff from the bomb market is
(03:59):
Jim saying there being up there. Maybe that'll give them pause,
maybe take a little air out of the market. This
is a big, you know, rally, cryptos up huge. I
can tell you from our vantage point. You know, we've
been expecting a fourth quarter rally. Uh There's something that
I refer to when an incumbent and unpopular incumbent loses
(04:24):
is something called the ding Don the witch's dead effect.
I know Biden stepped out a while ago, but I
think a lot of the country was troubled by bye
by where we were. Uh So this is a bit
of a celebration that we've got something new here, at
least from Wall Street. I know, Jim, you've been talking
about the betting markets for the election. You did some nice,
(04:45):
nice posts, some nice work on that. Amazing how accurate
they ended up being. I mean, it was, it was.
It was, I don't know, fun watching them change with
with the results coming in last night, and how much
closer to the truth they were than the actual pulse.
I'd love to hear your take on that. I mean,
it really, you know, just sort of mirrored the way
(05:06):
the night was going with the and and what what
that I mean, the predicted versus Calshi and poly Market
against the three main ones all going in the same
direction as it was, you know, you know, evolving.
Speaker 4 (05:20):
Yeah, as a matter of fact, there's there's twelve markets
in general around the world that you can bet on
the US election. You mentioned the three biggest and predicted
Calshi and Polymarket.
Speaker 3 (05:30):
I might add that, you know, Robin Hood.
Speaker 4 (05:32):
And Interactive Brokers had their own markets as well, and
that brought in significant numbers. And then you can add
to that dj T, you know, Trump Media do symbol.
DJT effectively became a meme stock betting on the outcome
of the election, and Bitcoin. After Trump went to Bitcoin
Nashville in July, it became tied up as a partisan
(05:53):
coin too.
Speaker 3 (05:54):
So the reason I bring all that up, you add
it all up.
Speaker 4 (05:56):
There was a lot of money bet bet on this market,
but on this outcome, and it was all very consistent.
They all moved together, they all had a very consistent
idea that Trump was doing better than the polling suggested.
And throughout the whole period people were talking about it
was being manipulated. There was a whale there. It's all
(06:18):
a bunch of crypto bros. And they're they're not representative
of the broader population, to which I've often argued, Yeah,
so that means that anytime somebody, some old white guy
buys a cosmetic company on Wall Street, were supposed to
discount because he doesn't understand cosmetic companies. But you know,
the idea at the end of the day is when
people enter a betting market, they're there to win, and
(06:43):
they're there to try and predict the outcome. Now I
didn't say they would, I said they're trying to. They're
not there to express an opinion. If you want to
express an opinion about a candidate, go get a Laan
sign it's free.
Speaker 5 (06:56):
It's differ between a put call ratio and a sentiment indicator.
A survey. You got people either telling you what they
think or putting their money where their mouth is, and
that I think makes a difference. I mean even with
you know, investors intelligence sentiment, at least they're asking people
like us who get paid to to talk about what
they think, not just some you know, individual investors. So
(07:18):
I think that that's important. I think we're also at
a seasonal you know, cross crossroads here for the market.
I know everyone would started, you know, oh the best.
The worst month is selemate didn't work. We didn't get
the November. They excuse me some Tember October cell off. Well,
in my book, when seasonalities, when the market does something
(07:38):
different than the seasonality, whether it's goes up when it's
when it's bearish or down when it's bullish, you've got
other forces that are more powerful at play. And when
those when that period's over, those forces are going to
really have their saying takeover. So I'm seeing the potential
for some really bullish uh you know forces pushing them
or not just the election year, not just you know,
(07:59):
tech and not just the economy which has shown quite resilient,
or the interest rates, but also the macro trend of
AI and the tech boom. The stocks that came through
my screens most recently in our basket were these sort
of auxiliary stocks, you know, in addition to some of
the other ones that we were talked about over the
past year that are like air conditioning and electrical companies
(08:21):
that are benefiting from the build out of the data
centers and all that stuff. So this is this is
you know, what I call a culturally enabling, paradigm shifting
technology that changes the world and changes everyone's lives individually.
And it's just in the early innings, so we're seeing that.
Speaker 1 (08:36):
On top of it, I definitely want to talk about
some stocks and sectors, but one thing I wanted to
ask first is, you know, the immediate post election reaction
to what you think is durable.
Speaker 2 (08:44):
I mean, we've seen.
Speaker 1 (08:45):
Dollar up, treasuries down, Bitcoin up, you know, stocks up,
with small caps leading and on and on.
Speaker 2 (08:52):
These are the Trump trades, whatever you want to call them.
Speaker 1 (08:54):
Which of those do you think And I'm kind of
curious about gold especially, which of these do you think
are durable versus which of these do you think, you know,
you get the big move and then maybe they kind
of fade as we roll into the new year.
Speaker 4 (09:05):
So I'll start and I think that probably the most
durable trade is the dollar in yields dollar. If you
actually overlay the dollar index with like the ten year yield,
they're the same thing, and they've been the same thing
for a couple of years, because interest rate differentials seem
to drive the dollar's movement the most. When yields go up,
the dollar goes up. When yields go down, the dollar
(09:26):
goes down and yields her up a lot. And this
gets to something that Jeff was saying too, is like
I get it, deregulation, I get it, you know, tax cuts.
Speaker 3 (09:37):
I get it.
Speaker 4 (09:37):
That we've got AI and we've got a big macro boom.
So what gets in the way, what gets in the
way of all of any of that or all of
that is inflation. Is if I stuff, everybody's so full
of money that they go out and they start spending it,
and they start bidding up the prices of everything from
the cost of getting your plumber to fix your toilet
to a new car, and then we haven't inflation Otherwise,
(10:02):
why are we wasting our time on a twenty five
basis point cut? If the FED really believes inflation is
solved and it's going away, why not cut all the
way to zero tomorrow? Well, the reason you don't do
that is you're afraid that you're going to spark such
a stimulative boom that you would get inflation. So at
some point there is that potential fear of inflation. So
if stocks go up, if if crypto goes up, and
(10:26):
if everybody still believes there's massive stimulus coming, and the
bond market keeps going up and yield, I'll go back
to that famous Jim Carvil line, And when I get reincarnated,
I want to come back as a bond market, not
a four hundred hitter, because you could scare everybody.
Speaker 3 (10:41):
Higher interest rates have the ability to end all of this.
Speaker 4 (10:46):
Now four forty five and the ten year note, which
is where we are right now, that might not.
Speaker 3 (10:50):
Be the level that's going to end it.
Speaker 4 (10:52):
But if we keep doing this with higher interest rates,
that could be the one thing. Otherwise, like I said,
if you don't believe inflation is a problem, then what
isn't jay cut rates to zero tomorrow? I mean, what
are we wasting time for? Because if there's no inflation
to stop this, then why are we holding back anything
at all. The reason we hold back is precisely because
(11:14):
we're afraid if we go too far, we're gonna create inflation.
And this big rise in yields we've seen. The ten
year yield is up eighty basis points since the Fed
cut on September eighteenth. This is the biggest rise ever
in yields. No one hit The Fed thought on September eighteenth, Hey,
we're gonna cut rates, and you know what's gonna happen.
(11:34):
Mortgage rates are gonna go up a full percent over
the next two months. That's pretty much what's happened. They
thought the opposite was gonna happen. Why are mortgage rates
up because treasury rates are up? Why are treasury rates
up because the market is saying to the Fed, we
don't need monetary stimulus. We got a decent economy now
that Trump's been elected, which they kind of thought if
you looked at the betting markets, they were leaning that
(11:55):
way for weeks. We're gonna get a lot of fiscal stimulus.
Speaker 3 (11:59):
We don't need it anymore.
Speaker 4 (12:00):
And Jay you were talking about cutting hundreds of basis
points rates by hundreds of basis points between now and
the end of next year. Unnecessary, and that's what the
market seems to be saying, and that's what the reason
it's worried about that is because all of this could
produce inflation in twenty twenty five.
Speaker 1 (12:20):
Yeah, Jeff, I'm curious about your thoughts there too. I mean,
you know, again as you look into the rotation in
the small caps, the fear, I know, Edyard Denny's talking
about the melt up scenario being one of those things
that he's worried about with excessive FED stimulus and of
course the post election reaction there.
Speaker 2 (12:33):
What are your thoughts on that.
Speaker 5 (12:35):
I mean, I think the stock market and the stocks
are going to keep going up right here, especially over
the next few months. This is the sweet spot for
small caps November to January, as well as crypto, I mean,
full disclosure on along all that stuff. We had our
seasonal BI signal in October. We're in sectors, the market, stocks, crypto.
(12:58):
I just I just hope the FEDS, as Jim is
alluding to, listens to the bond market. We did some
digging over the years, and you know, the FED was
put in place to have guardrails, not to dictate to
the bond market. What's going on. The bond market is
the smartest thing out there. It's telling the Fed to
(13:18):
we don't need stimulus. We don't need monetary stimulus. Back
in eighty one, when you know, we had that that
big inversion a couple of years ago, that was the
biggest since eighty one, back when the rates were like
in the upper teens. There's in the minutes you hear
Vulker talking about, you know, well, let's we're going to
(13:40):
keep interust rates between fifteen and twenty one percent, fifteen
to twenty one percent, not four or five. Unless the
bond market, you know, pushes it out there, then we'll
make some adjustments. So they need to be listening to
the bond market and making adjustments based upon what the
bond market is telling them. And I would venture to
to to recommend that they don't cut tomorrow, that they pause, reevaluate,
(14:06):
become data dependent, and if they're seeing the ten year
and the mortgage rates and all this movement as we're
seeing here, let's pay that the economy is strong. It's proven resilient,
and we have the potential of some serious inflationary activity
coming on with the stimulus and deregulation, and the animal
(14:28):
spirits get getting excited.
Speaker 3 (14:30):
Yeah, so let me just jump in real quick. Jeff,
You're right.
Speaker 4 (14:34):
I would argue they shouldn't cut tomorrow. But Jay Paul's
put himself in a terrible position. He cut fifty basis
points after Labor Day in an election year. He changed
policy because they were holding, and then he went to cut.
That's the first time they've ever changed policy. They could
continue to cut if they were but they changed it
(14:55):
by cutting, and he went the extra mile of fifty.
Speaker 3 (14:58):
If he was to.
Speaker 4 (14:59):
Hold tomorrow, he would open himself up to legitimate criticism
that he was partisan. He was trying to get a
certain candidate elected and now he's going to try and
punish the candidate that got elected. Do I think he's
doing that?
Speaker 3 (15:15):
No, I don't.
Speaker 5 (15:16):
But he could also defend that by saying he wanted
to get instead of doing one one one, he wanted
to get two out there and see where things. You know,
how the market reacted as well.
Speaker 4 (15:25):
I agree, Like I said, do I think he was
being partisan? No? I don't, But he put himself on
the rack to get punished over this by doing it
in this format. He's supposed to be politically savvy. That
was not a politically savvy move. So now he's in
a tough spot. Even if he cuts tomorrow, which the
(15:45):
market is putting a ninety seven percent chance will do it,
and holds in December, he could still be subject to
that same argument. You tried to get a certain candidate
elected through monetary policy, and then when a candidate that
you didn't want got elected, you're not going to stop
that and maybe even turn around and punish.
Speaker 3 (16:03):
With higher rates.
Speaker 4 (16:04):
And so this is terrible that the Fed did this,
And this is a self owned goal by J. Paul
on this all the way down the line. He should
have known better, but he went ahead and he did
it anyway, And now he's if he had just.
Speaker 5 (16:18):
Cut a quarter, it probably would have been Okay. Yes,
this was what the bottom market was telling him.
Speaker 3 (16:23):
To do, right.
Speaker 4 (16:25):
It was the fifty basis points in and of itself
is not the problem.
Speaker 3 (16:31):
It's the signal. The signal is.
Speaker 4 (16:33):
We are going to cut a lot, and here comes
a lot of cuts through twenty five. Okay. Then immediately
after that happened. The five hundred PhDs at the Fed
do what they do best. They got the forecast for
the economy completely wrong, and it wound up being much
better than they thought, and now all of a sudden
they're going to have to start to back off of
it after the election.
Speaker 3 (16:55):
So it was the signal that you sent.
Speaker 4 (16:58):
If you'd cut twenty five bag points, that would have
sent a far different signal than starting with fifty, and
you did it six weeks before the election. And that's
why he put himself into this position. I personally think
I used to argue the biggest mistake Paul made was
in twenty twenty one when he used the word transitory
about the big run up inflation.
Speaker 3 (17:17):
This one might be worse.
Speaker 4 (17:20):
You know, it's still kind of a working process, but
you know, as far as getting this policy wrong right
now and trying to extricate himself from it, and he
might wind up cutting interest rates just so that he
can save face, which then just puts the market further offside.
So it's going to be interesting to see how he
explains this one tomorrow.
Speaker 1 (17:39):
Yeah, as let me go back to that sort of
sector argument and names if you want to name any
specific names.
Speaker 2 (17:44):
I know, sometimes you do, sometimes you don't. You talk
about AI as being a.
Speaker 1 (17:47):
Theme that I think probably worked pre Trump and is
going to work post Trump as well, Jeff, any other
groups out there, I mean besides small caps as a category,
any other groups, you know, financials, what are your thoughts
and energy? I'm just going to suss out some of
those details there in the.
Speaker 5 (18:01):
I mean energy I think is counterintuitive here. I think
the Trump administration will be friendly to supply, which in
our basic economic supply demand analysis means that it's not
going to be very favorable to energy prices because they'll
probably be at least a perception of more supply coming
on the things for me, I mean crypto bitcoin is
(18:26):
is the Trump trade right now? It seems to be,
you know and dj T as as Jim mentioned healthcare technology.
I'm a little bit less concerned about who's in the
White House then who's in Congress. And I think the
overarching trend here with technology and the rest of the
(18:50):
economy that supports that. I mean some of the stocks
that that are that we have that have been popping
recently or these these I'll throw out one name, Powell
Industries just jump yesterday. I own it, full disclosure. It's
an HVAC you know company that that works in in
in you know, cooling these data centers, and there's all
these sort of of ancillary and auxiliary parts of the
(19:14):
of the well, you know, super micro and those types
of stocks of are got way ahead of themselves. The
supporting players are where I think the money is to
be made. Biotech. I'm in the iv B myself. But yeah,
still small caps in general. You know, hopefully people got
into that when it was down during the seasonal low
(19:38):
period and not trying to follow it and chase it
right now. Just a little small, you know, seasonal short
term thing here. There could be some sell off here,
a little bit of pullback. The middle of November up
Thanksgiving tends to show a little weakness. So I don't
like to see people chase markets. So if you're not
in right now, maybe wait for a bit of soft
patch ahead of that. The week before thanks Giving tends
(20:00):
to be a little bit of another bypoint, a little
dip period in the calendar.
Speaker 4 (20:05):
So Mike, if I could jump in on that same question,
full disclosure. We manage a discretionary indeck called the Biaco
Total Return Index.
Speaker 3 (20:13):
It's a fixed income index.
Speaker 4 (20:14):
We're trying to beat the benchmark fixed income market.
Speaker 3 (20:17):
And there's an.
Speaker 4 (20:18):
ETF WTB on run by Wisdom Tree that tracks are
index think you know the S and P Index Committee
manages the S ANDB five hundred and spy tracks that
were set up the same way. So within our index,
we are short duration because we are positioned for interest
rates to go up.
Speaker 3 (20:35):
We're trying to capture yield.
Speaker 4 (20:36):
By by having a big overweight in mortgages and a
big underweight in corporate bonds. If I have to pick
up yield somewhere, I would rather pick it up with
convexity in the mortgage market than in the bond market.
We have an out of index bat. We do do
those in both the dollar index, so we've got a
ten percent long position in dollar forward swaps. We also
(20:57):
have a ten percent position in short term treasury inflation
protected securities, betting that you know, inflation expectations are going
to continue higher, and I think that that's what we're
going to see. We're going to continue to see della strength,
We're going to continue to see expectations for inflation to
go higher.
Speaker 3 (21:13):
We're going to.
Speaker 4 (21:13):
Continue to see interest rates probably stay at these levels,
if not move higher. And like I said, if I
wish to have to spuy something with yield, I would
rather own mortgage securities, then I would rather own corporate bonds.
Speaker 1 (21:28):
Perfect you know, I know we have a kind of
hard stop on the amount of time here, so I
wanted to get into kind of my last question for
both of you. You're going to be joining us for
the twenty four Money Show Master Symposium in Sarasota this December. Jim,
I guess with you first, can you give viewers a
sneak peek at, you know, people that are going to
be attending what you might be talking about there.
Speaker 4 (21:46):
Yeah, I'm going to talk about the bond market post
election and what it means where to go as well,
and I'm also going to hold a workshop too about
the investing in bonds. In five seconds, you should expect,
and I'm explaining this at the conference, you should expect
the stock market from this moment forward over the next
(22:07):
several years to give you like a six to eight
percent return. Now it's been giving you twenty for the
last couple of years, but you shouldn't expect that all
the time. Well, if the stock market is going to
be turn you six to eight, it's a little bit
below average. The bond market, all of a sudden is
in the five percent range. When you add in corporate
bonds and mortgages. It's now competitive with the stock market. Tina,
(22:27):
there is no alternative that ended in twenty twenty, and
I wanted to talk about why the bond market is
competitive to the stock market and how it fits in
a larger portfolio.
Speaker 1 (22:37):
Great, Great, Jeff, same question with you want is somebody
going to walk away with after hearing you speaking Sarasota.
Speaker 5 (22:41):
I'm going to talk about the stock market post election
and the power of the four year cycle and seasonal investing,
as well as how much more bullish the post election
he is for stocks in recent years best year of
the four year cyclist in eighty five, I'll be doing
a workshop on all sorts of seasonal trades, and I
will be revealing more of the stocks and ETFs individual names.
(23:01):
I think we're doing a stock panel with a couple
of other guys, so we'll get into some of these names,
and I should have another basket of new stocks we'll
be putting out in the next couple of weeks that'll
be able to share with people while I'm down there,
so it's going to be more stock oriented, that's my bag.
I go into the bonds during the worst months, the
week months of the year, which was a nice five
(23:23):
percent place to be during the sort of May June
of October period before I went back into the long equities.
So look forward to seeing both of you guys down
there and everybody else.
Speaker 2 (23:34):
All right, Well, listen, gentlemen, thank you so much for insights. Viewers.
Speaker 1 (23:36):
If you do want to learn more from Jim and Jeff,
they're going to be speaking at that Money Show Master
Symposium in Sarasota.
Speaker 2 (23:41):
It runs December.
Speaker 1 (23:42):
Five to seven at the Higatt Regency, Sarasota. Can you
find out more details about the event by clicking the
link in the video description below. Gentlemen, thanks again for
your time.
Speaker 5 (23:50):
Thanks Mike.
Speaker 3 (23:51):
Thank you, Mike.
Speaker 1 (23:53):
We'll have more interviews for you every week, so I
encourage you to subscribe to the Money Master's podcast so
you can stay up to date with the insights from
time money Experts. You can follow me on Twitter at
real Mike Larsen and follow Money Show for more investing
and trading content on Twitter, Instagram and YouTube at Money Show.
Speaker 2 (24:10):
Thanks for listening, See you next time.
Fight for the White House is over, but the fight
for your portfolio is just beginning. We now know Donald
Trump will take office in early twenty twenty five, that
Republicans will control the Senate, that the House could go
their way as well. That could lead to several new economic, geopolitical,
and market trends to the year ahead. More debt and
deficit spending, insurgence in inflation, big tax cuts, less regulation
(00:26):
in the financial sector, and cryptocurrency arena.
Speaker 2 (00:28):
Plus powerful market.
Speaker 1 (00:29):
Gains with news sectors possibly taking the lead. There's certainly
a ton to cover in this week's Money Show Money
Master's Podcast, so let's get to it. My guests today
are Jim Bianco, President and macro strategist at Bianco Research,
and Jeff Hirsch, editor in chief of the Stock Traders
Almanac and Almanac Investor.
Speaker 2 (00:46):
Gentlemen, how are you.
Speaker 3 (00:48):
Very good to ask you?
Speaker 1 (00:49):
Yeah, I'm glad you could be here, obviously, as we're
meeting an incredible amount of things going on in the
markets and with the elections, I just want to kind
of throw it out there, starting right from the top,
get your initial reactions on the election results and the
powerful market reactions we've seen as a result of that.
Speaker 4 (01:04):
The markets I think are looking at a Trump victory,
the Senate going Republican, potentially a red wave with the
House staying Republican, although at the time of recording that's
still an open question, but it's kind of leaning that
way as being very stimulative, tax cuts, deregulation, and maybe
(01:24):
even tariffs.
Speaker 3 (01:26):
And so we're.
Speaker 4 (01:27):
Looking at an economy wherever you thought the economy was yesterday,
that you should be upgrading your outlook for the economy today.
And that's why I think you're seeing two things happen
at the same time. And you're seeing a giant move
higher inequities, especially driven by small cap equities that are up.
You know, they arrest all five percent at one point today,
(01:49):
on the idea that you know, there's gonna be more
people buying stuff, there's to be more earnings, and you're
seeing a massive rise in yields. The thirty year yield
is up was up at one point two twenty six
basis points in the day, the most we've seen in
a single day since twenty twenty. On the idea that
this massive stimulus brings about with it a very real
risk of inflation at a time when the FED is
(02:12):
probably seemed to add to it by cutting interest rates
literally the day after we're going to record, and I
think the market's trying to tell the Fed that that's
a mistake, but they're not listening, and they're going to
do it anyway. So that's why you've seen this massive
move up and yields and up in stocks at the
same time.
Speaker 2 (02:28):
Jeff, how about your big picture thoughts there.
Speaker 5 (02:30):
I think the biggest win is that we have a
clear decision quickly. My biggest concern, and I know a
lot of the concern out there, was that this would
get drawn out. Pretty sure. We knew. I went to
bed a little early thinking I wouldn't have to you know,
we wouldn't get a decision, and I woke up, you know,
before dawn, like I do, and Harry kind of knew
(02:53):
that it was. I mean, as Jim said, you know,
pretty much a red wave. My data in the twenty
twenty five Vomanac shows that Republican congresses are what matter most.
The market combination of a Republican Congress and a Democratic
president averages about thirteen percent for down SMP about fifteen
point six for a NASDAQ. I think the deregulation is
(03:18):
what's driving the small caps, the promise for the more
ease of doing business, and in general, post election years
are better they than they know historically were where since
eighty five. It's the best year of the four year
cycle on average seventeen point two percent, but up eight
(03:39):
down two. I just I really think the decision is clear.
I'm concerned about the Fed tomorrow. I thought they should
have done a quarter. I'm not sure why they went
fifty to show off for something. Maybe that will with
all this inflation, every stuff from the bomb market is
(03:59):
Jim saying there being up there. Maybe that'll give them pause,
maybe take a little air out of the market. This
is a big, you know, rally, cryptos up huge. I
can tell you from our vantage point. You know, we've
been expecting a fourth quarter rally. Uh There's something that
I refer to when an incumbent and unpopular incumbent loses
(04:24):
is something called the ding Don the witch's dead effect.
I know Biden stepped out a while ago, but I
think a lot of the country was troubled by bye
by where we were. Uh So this is a bit
of a celebration that we've got something new here, at
least from Wall Street. I know, Jim, you've been talking
about the betting markets for the election. You did some nice,
(04:45):
nice posts, some nice work on that. Amazing how accurate
they ended up being. I mean, it was, it was.
It was, I don't know, fun watching them change with
with the results coming in last night, and how much
closer to the truth they were than the actual pulse.
I'd love to hear your take on that. I mean,
it really, you know, just sort of mirrored the way
(05:06):
the night was going with the and and what what
that I mean, the predicted versus Calshi and poly Market
against the three main ones all going in the same
direction as it was, you know, you know, evolving.
Speaker 4 (05:20):
Yeah, as a matter of fact, there's there's twelve markets
in general around the world that you can bet on
the US election. You mentioned the three biggest and predicted
Calshi and Polymarket.
Speaker 3 (05:30):
I might add that, you know, Robin Hood.
Speaker 4 (05:32):
And Interactive Brokers had their own markets as well, and
that brought in significant numbers. And then you can add
to that dj T, you know, Trump Media do symbol.
DJT effectively became a meme stock betting on the outcome
of the election, and Bitcoin. After Trump went to Bitcoin
Nashville in July, it became tied up as a partisan
(05:53):
coin too.
Speaker 3 (05:54):
So the reason I bring all that up, you add
it all up.
Speaker 4 (05:56):
There was a lot of money bet bet on this market,
but on this outcome, and it was all very consistent.
They all moved together, they all had a very consistent
idea that Trump was doing better than the polling suggested.
And throughout the whole period people were talking about it
was being manipulated. There was a whale there. It's all
(06:18):
a bunch of crypto bros. And they're they're not representative
of the broader population, to which I've often argued, Yeah,
so that means that anytime somebody, some old white guy
buys a cosmetic company on Wall Street, were supposed to
discount because he doesn't understand cosmetic companies. But you know,
the idea at the end of the day is when
people enter a betting market, they're there to win, and
(06:43):
they're there to try and predict the outcome. Now I
didn't say they would, I said they're trying to. They're
not there to express an opinion. If you want to
express an opinion about a candidate, go get a Laan
sign it's free.
Speaker 5 (06:56):
It's differ between a put call ratio and a sentiment indicator.
A survey. You got people either telling you what they
think or putting their money where their mouth is, and
that I think makes a difference. I mean even with
you know, investors intelligence sentiment, at least they're asking people
like us who get paid to to talk about what
they think, not just some you know, individual investors. So
(07:18):
I think that that's important. I think we're also at
a seasonal you know, cross crossroads here for the market.
I know everyone would started, you know, oh the best.
The worst month is selemate didn't work. We didn't get
the November. They excuse me some Tember October cell off. Well,
in my book, when seasonalities, when the market does something
(07:38):
different than the seasonality, whether it's goes up when it's
when it's bearish or down when it's bullish, you've got
other forces that are more powerful at play. And when
those when that period's over, those forces are going to
really have their saying takeover. So I'm seeing the potential
for some really bullish uh you know forces pushing them
or not just the election year, not just you know,
(07:59):
tech and not just the economy which has shown quite resilient,
or the interest rates, but also the macro trend of
AI and the tech boom. The stocks that came through
my screens most recently in our basket were these sort
of auxiliary stocks, you know, in addition to some of
the other ones that we were talked about over the
past year that are like air conditioning and electrical companies
(08:21):
that are benefiting from the build out of the data
centers and all that stuff. So this is this is
you know, what I call a culturally enabling, paradigm shifting
technology that changes the world and changes everyone's lives individually.
And it's just in the early innings, so we're seeing that.
Speaker 1 (08:36):
On top of it, I definitely want to talk about
some stocks and sectors, but one thing I wanted to
ask first is, you know, the immediate post election reaction
to what you think is durable.
Speaker 2 (08:44):
I mean, we've seen.
Speaker 1 (08:45):
Dollar up, treasuries down, Bitcoin up, you know, stocks up,
with small caps leading and on and on.
Speaker 2 (08:52):
These are the Trump trades, whatever you want to call them.
Speaker 1 (08:54):
Which of those do you think And I'm kind of
curious about gold especially, which of these do you think
are durable versus which of these do you think, you know,
you get the big move and then maybe they kind
of fade as we roll into the new year.
Speaker 4 (09:05):
So I'll start and I think that probably the most
durable trade is the dollar in yields dollar. If you
actually overlay the dollar index with like the ten year yield,
they're the same thing, and they've been the same thing
for a couple of years, because interest rate differentials seem
to drive the dollar's movement the most. When yields go up,
the dollar goes up. When yields go down, the dollar
(09:26):
goes down and yields her up a lot. And this
gets to something that Jeff was saying too, is like
I get it, deregulation, I get it, you know, tax cuts.
Speaker 3 (09:37):
I get it.
Speaker 4 (09:37):
That we've got AI and we've got a big macro boom.
So what gets in the way, what gets in the
way of all of any of that or all of
that is inflation. Is if I stuff, everybody's so full
of money that they go out and they start spending it,
and they start bidding up the prices of everything from
the cost of getting your plumber to fix your toilet
to a new car, and then we haven't inflation Otherwise,
(10:02):
why are we wasting our time on a twenty five
basis point cut? If the FED really believes inflation is
solved and it's going away, why not cut all the
way to zero tomorrow? Well, the reason you don't do
that is you're afraid that you're going to spark such
a stimulative boom that you would get inflation. So at
some point there is that potential fear of inflation. So
if stocks go up, if if crypto goes up, and
(10:26):
if everybody still believes there's massive stimulus coming, and the
bond market keeps going up and yield, I'll go back
to that famous Jim Carvil line, And when I get reincarnated,
I want to come back as a bond market, not
a four hundred hitter, because you could scare everybody.
Speaker 3 (10:41):
Higher interest rates have the ability to end all of this.
Speaker 4 (10:46):
Now four forty five and the ten year note, which
is where we are right now, that might not.
Speaker 3 (10:50):
Be the level that's going to end it.
Speaker 4 (10:52):
But if we keep doing this with higher interest rates,
that could be the one thing. Otherwise, like I said,
if you don't believe inflation is a problem, then what
isn't jay cut rates to zero tomorrow? I mean, what
are we wasting time for? Because if there's no inflation
to stop this, then why are we holding back anything
at all. The reason we hold back is precisely because
(11:14):
we're afraid if we go too far, we're gonna create inflation.
And this big rise in yields we've seen. The ten
year yield is up eighty basis points since the Fed
cut on September eighteenth. This is the biggest rise ever
in yields. No one hit The Fed thought on September eighteenth, Hey,
we're gonna cut rates, and you know what's gonna happen.
(11:34):
Mortgage rates are gonna go up a full percent over
the next two months. That's pretty much what's happened. They
thought the opposite was gonna happen. Why are mortgage rates
up because treasury rates are up? Why are treasury rates
up because the market is saying to the Fed, we
don't need monetary stimulus. We got a decent economy now
that Trump's been elected, which they kind of thought if
you looked at the betting markets, they were leaning that
(11:55):
way for weeks. We're gonna get a lot of fiscal stimulus.
Speaker 3 (11:59):
We don't need it anymore.
Speaker 4 (12:00):
And Jay you were talking about cutting hundreds of basis
points rates by hundreds of basis points between now and
the end of next year. Unnecessary, and that's what the
market seems to be saying, and that's what the reason
it's worried about that is because all of this could
produce inflation in twenty twenty five.
Speaker 1 (12:20):
Yeah, Jeff, I'm curious about your thoughts there too. I mean,
you know, again as you look into the rotation in
the small caps, the fear, I know, Edyard Denny's talking
about the melt up scenario being one of those things
that he's worried about with excessive FED stimulus and of
course the post election reaction there.
Speaker 2 (12:33):
What are your thoughts on that.
Speaker 5 (12:35):
I mean, I think the stock market and the stocks
are going to keep going up right here, especially over
the next few months. This is the sweet spot for
small caps November to January, as well as crypto, I mean,
full disclosure on along all that stuff. We had our
seasonal BI signal in October. We're in sectors, the market, stocks, crypto.
(12:58):
I just I just hope the FEDS, as Jim is
alluding to, listens to the bond market. We did some
digging over the years, and you know, the FED was
put in place to have guardrails, not to dictate to
the bond market. What's going on. The bond market is
the smartest thing out there. It's telling the Fed to
(13:18):
we don't need stimulus. We don't need monetary stimulus. Back
in eighty one, when you know, we had that that
big inversion a couple of years ago, that was the
biggest since eighty one, back when the rates were like
in the upper teens. There's in the minutes you hear
Vulker talking about, you know, well, let's we're going to
(13:40):
keep interust rates between fifteen and twenty one percent, fifteen
to twenty one percent, not four or five. Unless the
bond market, you know, pushes it out there, then we'll
make some adjustments. So they need to be listening to
the bond market and making adjustments based upon what the
bond market is telling them. And I would venture to
to to recommend that they don't cut tomorrow, that they pause, reevaluate,
(14:06):
become data dependent, and if they're seeing the ten year
and the mortgage rates and all this movement as we're
seeing here, let's pay that the economy is strong. It's proven resilient,
and we have the potential of some serious inflationary activity
coming on with the stimulus and deregulation, and the animal
(14:28):
spirits get getting excited.
Speaker 3 (14:30):
Yeah, so let me just jump in real quick. Jeff,
You're right.
Speaker 4 (14:34):
I would argue they shouldn't cut tomorrow. But Jay Paul's
put himself in a terrible position. He cut fifty basis
points after Labor Day in an election year. He changed
policy because they were holding, and then he went to cut.
That's the first time they've ever changed policy. They could
continue to cut if they were but they changed it
(14:55):
by cutting, and he went the extra mile of fifty.
Speaker 3 (14:58):
If he was to.
Speaker 4 (14:59):
Hold tomorrow, he would open himself up to legitimate criticism
that he was partisan. He was trying to get a
certain candidate elected and now he's going to try and
punish the candidate that got elected. Do I think he's
doing that?
Speaker 3 (15:15):
No, I don't.
Speaker 5 (15:16):
But he could also defend that by saying he wanted
to get instead of doing one one one, he wanted
to get two out there and see where things. You know,
how the market reacted as well.
Speaker 4 (15:25):
I agree, Like I said, do I think he was
being partisan? No? I don't, But he put himself on
the rack to get punished over this by doing it
in this format. He's supposed to be politically savvy. That
was not a politically savvy move. So now he's in
a tough spot. Even if he cuts tomorrow, which the
(15:45):
market is putting a ninety seven percent chance will do it,
and holds in December, he could still be subject to
that same argument. You tried to get a certain candidate
elected through monetary policy, and then when a candidate that
you didn't want got elected, you're not going to stop
that and maybe even turn around and punish.
Speaker 3 (16:03):
With higher rates.
Speaker 4 (16:04):
And so this is terrible that the Fed did this,
And this is a self owned goal by J. Paul
on this all the way down the line. He should
have known better, but he went ahead and he did
it anyway, And now he's if he had just.
Speaker 5 (16:18):
Cut a quarter, it probably would have been Okay. Yes,
this was what the bottom market was telling him.
Speaker 3 (16:23):
To do, right.
Speaker 4 (16:25):
It was the fifty basis points in and of itself
is not the problem.
Speaker 3 (16:31):
It's the signal. The signal is.
Speaker 4 (16:33):
We are going to cut a lot, and here comes
a lot of cuts through twenty five. Okay. Then immediately
after that happened. The five hundred PhDs at the Fed
do what they do best. They got the forecast for
the economy completely wrong, and it wound up being much
better than they thought, and now all of a sudden
they're going to have to start to back off of
it after the election.
Speaker 3 (16:55):
So it was the signal that you sent.
Speaker 4 (16:58):
If you'd cut twenty five bag points, that would have
sent a far different signal than starting with fifty, and
you did it six weeks before the election. And that's
why he put himself into this position. I personally think
I used to argue the biggest mistake Paul made was
in twenty twenty one when he used the word transitory
about the big run up inflation.
Speaker 3 (17:17):
This one might be worse.
Speaker 4 (17:20):
You know, it's still kind of a working process, but
you know, as far as getting this policy wrong right
now and trying to extricate himself from it, and he
might wind up cutting interest rates just so that he
can save face, which then just puts the market further offside.
So it's going to be interesting to see how he
explains this one tomorrow.
Speaker 1 (17:39):
Yeah, as let me go back to that sort of
sector argument and names if you want to name any
specific names.
Speaker 2 (17:44):
I know, sometimes you do, sometimes you don't. You talk
about AI as being a.
Speaker 1 (17:47):
Theme that I think probably worked pre Trump and is
going to work post Trump as well, Jeff, any other
groups out there, I mean besides small caps as a category,
any other groups, you know, financials, what are your thoughts
and energy? I'm just going to suss out some of
those details there in the.
Speaker 5 (18:01):
I mean energy I think is counterintuitive here. I think
the Trump administration will be friendly to supply, which in
our basic economic supply demand analysis means that it's not
going to be very favorable to energy prices because they'll
probably be at least a perception of more supply coming
on the things for me, I mean crypto bitcoin is
(18:26):
is the Trump trade right now? It seems to be,
you know and dj T as as Jim mentioned healthcare technology.
I'm a little bit less concerned about who's in the
White House then who's in Congress. And I think the
overarching trend here with technology and the rest of the
(18:50):
economy that supports that. I mean some of the stocks
that that are that we have that have been popping
recently or these these I'll throw out one name, Powell
Industries just jump yesterday. I own it, full disclosure. It's
an HVAC you know company that that works in in
in you know, cooling these data centers, and there's all
these sort of of ancillary and auxiliary parts of the
(19:14):
of the well, you know, super micro and those types
of stocks of are got way ahead of themselves. The
supporting players are where I think the money is to
be made. Biotech. I'm in the iv B myself. But yeah,
still small caps in general. You know, hopefully people got
into that when it was down during the seasonal low
(19:38):
period and not trying to follow it and chase it
right now. Just a little small, you know, seasonal short
term thing here. There could be some sell off here,
a little bit of pullback. The middle of November up
Thanksgiving tends to show a little weakness. So I don't
like to see people chase markets. So if you're not
in right now, maybe wait for a bit of soft
patch ahead of that. The week before thanks Giving tends
(20:00):
to be a little bit of another bypoint, a little
dip period in the calendar.
Speaker 4 (20:05):
So Mike, if I could jump in on that same question,
full disclosure. We manage a discretionary indeck called the Biaco
Total Return Index.
Speaker 3 (20:13):
It's a fixed income index.
Speaker 4 (20:14):
We're trying to beat the benchmark fixed income market.
Speaker 3 (20:17):
And there's an.
Speaker 4 (20:18):
ETF WTB on run by Wisdom Tree that tracks are
index think you know the S and P Index Committee
manages the S ANDB five hundred and spy tracks that
were set up the same way. So within our index,
we are short duration because we are positioned for interest
rates to go up.
Speaker 3 (20:35):
We're trying to capture yield.
Speaker 4 (20:36):
By by having a big overweight in mortgages and a
big underweight in corporate bonds. If I have to pick
up yield somewhere, I would rather pick it up with
convexity in the mortgage market than in the bond market.
We have an out of index bat. We do do
those in both the dollar index, so we've got a
ten percent long position in dollar forward swaps. We also
(20:57):
have a ten percent position in short term treasury inflation
protected securities, betting that you know, inflation expectations are going
to continue higher, and I think that that's what we're
going to see. We're going to continue to see della strength,
We're going to continue to see expectations for inflation to
go higher.
Speaker 3 (21:13):
We're going to.
Speaker 4 (21:13):
Continue to see interest rates probably stay at these levels,
if not move higher. And like I said, if I
wish to have to spuy something with yield, I would
rather own mortgage securities, then I would rather own corporate bonds.
Speaker 1 (21:28):
Perfect you know, I know we have a kind of
hard stop on the amount of time here, so I
wanted to get into kind of my last question for
both of you. You're going to be joining us for
the twenty four Money Show Master Symposium in Sarasota this December. Jim,
I guess with you first, can you give viewers a
sneak peek at, you know, people that are going to
be attending what you might be talking about there.
Speaker 4 (21:46):
Yeah, I'm going to talk about the bond market post
election and what it means where to go as well,
and I'm also going to hold a workshop too about
the investing in bonds. In five seconds, you should expect,
and I'm explaining this at the conference, you should expect
the stock market from this moment forward over the next
(22:07):
several years to give you like a six to eight
percent return. Now it's been giving you twenty for the
last couple of years, but you shouldn't expect that all
the time. Well, if the stock market is going to
be turn you six to eight, it's a little bit
below average. The bond market, all of a sudden is
in the five percent range. When you add in corporate
bonds and mortgages. It's now competitive with the stock market. Tina,
(22:27):
there is no alternative that ended in twenty twenty, and
I wanted to talk about why the bond market is
competitive to the stock market and how it fits in
a larger portfolio.
Speaker 1 (22:37):
Great, Great, Jeff, same question with you want is somebody
going to walk away with after hearing you speaking Sarasota.
Speaker 5 (22:41):
I'm going to talk about the stock market post election
and the power of the four year cycle and seasonal investing,
as well as how much more bullish the post election
he is for stocks in recent years best year of
the four year cyclist in eighty five, I'll be doing
a workshop on all sorts of seasonal trades, and I
will be revealing more of the stocks and ETFs individual names.
(23:01):
I think we're doing a stock panel with a couple
of other guys, so we'll get into some of these names,
and I should have another basket of new stocks we'll
be putting out in the next couple of weeks that'll
be able to share with people while I'm down there,
so it's going to be more stock oriented, that's my bag.
I go into the bonds during the worst months, the
week months of the year, which was a nice five
(23:23):
percent place to be during the sort of May June
of October period before I went back into the long equities.
So look forward to seeing both of you guys down
there and everybody else.
Speaker 2 (23:34):
All right, Well, listen, gentlemen, thank you so much for insights. Viewers.
Speaker 1 (23:36):
If you do want to learn more from Jim and Jeff,
they're going to be speaking at that Money Show Master
Symposium in Sarasota.
Speaker 2 (23:41):
It runs December.
Speaker 1 (23:42):
Five to seven at the Higatt Regency, Sarasota. Can you
find out more details about the event by clicking the
link in the video description below. Gentlemen, thanks again for
your time.
Speaker 5 (23:50):
Thanks Mike.
Speaker 3 (23:51):
Thank you, Mike.
Speaker 1 (23:53):
We'll have more interviews for you every week, so I
encourage you to subscribe to the Money Master's podcast so
you can stay up to date with the insights from
time money Experts. You can follow me on Twitter at
real Mike Larsen and follow Money Show for more investing
and trading content on Twitter, Instagram and YouTube at Money Show.
Speaker 2 (24:10):
Thanks for listening, See you next time.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Special Summer Offer: Exclusively on Apple Podcasts, try our Dateline Premium subscription completely free for one month! With Dateline Premium, you get every episode ad-free plus exclusive bonus content.
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!