Commentary – November 2024

Since the US election earlier this month, I have been wanting to write a commentary, trying to put some perspective on things.  To be honest, until recently, I had no idea what to write!  To say I was surprised by the results would be an understatement! 

We all knew from polling and commentary from pundits that the Presidential race would be tight but for Republicans to win the White House, Trump to win (by a slim margin) the popular vote and for Republicans to win control of both legislative houses— I wasn’t prepared for that.

For some perspective, I think looking at Trump’s rhetoric on the campaign trail is as good a place as any to start.  To summarize, most of his economic policies are unhinged to say the least and I doubt he will be able to push them through as they stand.  Tax cuts, for sure, but the level and breadth of tariffs he’s talking about are a different thing.  All we need to do is look back to his first 2 years in office where Republicans controlled all three branches of Government.  They were really only able to push through de-regulation on many industries (including financial markets) and a massive tax cut.  Oh…and they managed to shut down their own government even though they were in control! 

From an economic standpoint, I don’t think this time will be much different.  From a social perspective…that’s a whole different ball of wax!  Thankfully, we don’t invest in American social policies or the likability of their politicians, but I digress.  Here are a few points to keep in mind:

• In 2016, client portfolios saw growth as they did in 2017 even though Trump’s presidency was an unmitigated disaster, so much so that they lost control of the House and Senate in just two years and the White House 2 years later
• I had a conference call with one of the top-performing US equity managers, of whom I am a big supporter
• He believes that markets will be good for the next year, specifically US markets, tilting his portfolio toward more mid-cap US stocks
• He believes there is now broad-based earnings growth on the S&P 500 and the US will not dip in to recession
• Inflation may tick up again due to tax cuts
• He is light on consumer stocks if Trump gets some of his tariffs through
• I had another conference call with one of the most successful Canadian equity managers, of whom I am also a big supporter
• She is light on consumer goods and manufacturing in Canada in favour of oil and gas and financials
• She believes inflation may tick up too.  She believes 2025 will be good for most markets
• Wells Fargo analysts and Morgan Stanley both just announced their bullish stance on markets next year, joining a chorus of other institutional managers, many of whom we invest with
• From the technical perspective, call options outnumber puts by a ratio of 1.5 -to-1.0, compared with 1.3-to-1.0 during the rest of the year.  Calls assume markets will go up whereas puts assume the markets will drop
• The VIX (a measure of demand for portfolio protection) is at a 4-month low of 13.67.  Over the last 5 years, its range has been from roughly 12 to 66 (Covid).

So, there is tempered optimism in the market under Trump, like in 2016.  Back then I was telling clients that Trump and Republican legislators will be good for markets in the short- to medium- term but bad in the longer term due to de-regulation and their economic policy which begins and ends with tax cuts for the wealthy and gutting any government program meant to provide some semblance of a social safety net and support for less wealthy Americans. 

This time around, I think, will be more of the same.  History doesn’t repeat itself, but it does rhyme!

Regards,

Cory Hill
Financial Advisor & Portfolio Manager
T 604 732 6551

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