US President-elect Donald Trump. Photo / Getty Images
Felix Fok is a chartered financial analyst at Jarden.
OPINION
Markets, by nature, are forward-looking, though they can occasionally get ahead of themselves.
Following the recent United States election, stocks, bonds and currencies (crypto or otherwise) have moved in anticipation of what a second Donald Trump term could bring.
Certain investments have been dubbed “Trump trades” due to their anticipated gains. However, the question remains: Do all these assets truly merit their upward momentum?
The most direct link to Trump himself is Trump Media and Technology Group (DJT), a US$6.6 billion ($11.2b) enterprise majority-owned by Trump. This company, operating the social media platform Truth Social, forms a significant part of his wealth.
While the digital advertising landscape remains favourable where companies like Meta, Alphabet, Bytedance, and X (formerly Twitter) have effectively leveraged — DJT’s fundamentals are weak. Last quarter, DJT reported just US$1 million in revenue and a net loss of US$19m.
Additionally, they saw a 20% increase in shares, diluting existing shareholder value. Nonetheless, DJT’s market value has surged 70% this year, likely fuelled by speculation of a possible partnership with the Elon Musk-controlled X. Notably, DJT shares declined after the election win, underscoring the mixed market sentiment towards this stock.
Tesla and Musk’s political leverage:
Musk’s public alignment with the Republican campaign has proven beneficial. Tesla shares have rallied significantly post-election, benefitting from political factors and a rebound in profit margins in the last quarter.
Musk’s new role as head of the Department of Government Efficiency (the “Doge”) grants him influence, though it’s unclear how this position will directly benefit electric vehicle (EV) sales.
Musk’s political proximity could translate into ongoing incentives for EV adoption, government contracts, or lenient regulations for autonomous vehicle trials.
However, the Biden-era US$7500 per car EV tax credit looks set to end based on early indications from Trump’s transition team. This would be a negative for Tesla in the near term until weaker EV competitors exit the market.
Given that half of Tesla’s revenue is generated outside the US with 23% coming from China, the Shanghai manufacturing base may provide some protection against US-China tensions.
Yet, broad-based trade tariffs could slow Tesla’s global growth and reduce demand for premium consumer products. Ultimately, while having the President-elect’s ear is valuable, the potential benefits may be more significant for Musk’s other (unlisted) ventures, particularly SpaceX, and with this, there could be a shift in Musk’s attention within his businesses going forward.
Cryptocurrency rally and the appeal of Bitcoin:
Trump’s vow to establish the US as the “crypto capital of the planet” has fuelled optimism within the cryptocurrency market, with many expecting the appointment of a pro-crypto regulator at the US Securities and Exchange Commission.
Despite ongoing debates over crypto’s utility and associated risks, bitcoin’s performance can be distilled to supply and demand dynamics.
Unlike DJT shares, bitcoin supply is limited by its programming, and the available supply is likely much less than stated due to early misplacing of passwords and dormant accounts. As the first cryptocurrency, bitcoin has withstood major downturns and forks (the spawning of copycat coins) over the past 15 years, and it now stands at an all-time high.
Demand tends to follow price momentum, with more investors buying in as prices rise. In high-inflation environments, such as in some developing countries, there is demand for bitcoin as a digital “store of value” alternative to government-issued currencies. Although remote, a US strategic bitcoin reserve remains a blue-sky scenario, making bitcoin a highly asymmetric yet risky proposition.
Domestic resilience:
In the broader context, the US economy has shown resilience. Employment remains strong, with the unemployment rate in the low 4% range, and property prices have risen moderately.
Domestic banks and financial services companies may gain from tax cuts, deregulation, and other policies aimed at economic growth while remaining somewhat insulated from trade tariffs and policies affecting undocumented workers. Increased government spending and domestic investment could keep interest rates higher than anticipated, supporting banks’ interest income.
Additional domestic sectors, such as private prisons and transportation, may also benefit, as will the US dollar.
However, certain companies may face headwinds from potential labour shortages or declining commodity prices if global growth stalls amid rising supply. Large US multinationals, particularly those with significant US cost bases, may see a mixed impact through higher US dollar and weaker global markets.
Risk vs opportunity:
Given the uncertainty around timing and impact, investors likely have not fully repositioned portfolios for this new landscape, leaving further upside in some Trump trades if policies and execution materialise.
Ultimately, not all Trump trades are created equal: some are grounded in stronger fundamentals, while others may be fuelled by sentiment alone. Investors must weigh how much of the anticipated benefit is already priced in.
In the months ahead, attention will naturally shift to cabinet and committee nominations, policy details, and a clearer assessment of value. Buyer beware.
Jarden Wealth Limited is an NZX Advisory firm. A financial advice disclosure statement is available free of charge at jarden.co.nz/our-services/wealth-management/financial-advice-provider-disclosure-statement/.
Full disclaimer available at https://www.jarden.co.nz/disclaimers/wealth-management.
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