Stock markets were rallying before Donald Trump won the presidential election but his victory has turbocharged them.
The S&P 500 is seeing its best year-to-day performance since 1995, having topped 6,000 for the first time. Market sage Ed Yardeni sees it heading for 10,000.
The typical Trump trades, stocks likely to benefit from the former president's reelection, are doing well -- banks are soaring. Domestically focused smaller-value stocks on the Russell 2000 have benefited from expectations that his policies will help them even more than bigger firms that trade overseas. The dollar is gaining, and Bitcoin could be heading for $100,000. Meantime Tesla, run by Trump ally Elon Musk, is up a whopping 40% in the past week.
Even the bond-market reaction has been favorable. The two-year Treasury yield is higher than when the Federal Reserve started cutting interest rates in September, even though there are more cuts to come. Longer-term yields are also up, but there is nothing that would indicate the market suddenly expects inflation to get out of hand. If anything, the moves could be explained just by expectations of faster growth in the future.
Usually when traders see the economic outlook suddenly brightening, higher interest rates or energy prices would kick in and effectively hit the brakes. That's not happening now because Fed rates are already high and China's slump is keeping oil prices low.
But things could change. Billionaire Warren Buffett -- who likes to say "be fearful when others are greedy" -- is sitting on cash. He could be wrong and just missing out now, of course. But he often sees something that many investors don't.
Finally, presidents don't influence asset prices nearly as much as they might like voters to think they do -- unexpected events usually have much more sway. There's nothing wrong with soaking up the good vibes now, but the next pivot could come at any time.
-- Brian Swint
***
Bitcoin Is Smashing Records. How High Can It Go?
The price of Bitcoin surged again Tuesday, driving gains for the largest cryptocurrency to 30% over the past seven days. Investors are betting that Donald Trump's second presidential term will boost tokens because he has suggested more favorable regulation.
-- Bitcoin jumped 10% Monday, taking smaller cryptocurrencies such as
Dogecoin and Solana with it. The largest cryptocurrency breached $80,000
for the first time on Sunday.
-- Digital assets are getting a post-election boost as President-elect
Donald Trump has promised to make the U.S. "the crypto capital of the
world" and replace Securities and Exchange Commission Chair Gary Gensler,
who is seen as a digital-asset hawk.
-- "Reaching the $100-110K target area now looks like a matter of a couple
of weeks or even days," FxPro analyst Alex Kuptsikevich wrote.
What's Next: There are reasons for investors to be cautious in the wake of cryptos' large gains after the election. Despite claims that Bitcoin acts as a hedge against the dollar, recent trends suggest it's moving in tandem with broader market sentiment, said Nationwide's Mark Hackett, cautioning that the hype could override market fundamentals and introduce unnecessary risk.
-- Elsa Ohlen
***
Boeing's Quality Chief Leaving as Production to Restart
Just as it is trying to restart production after a prolonged machinists strike in the Pacific Northwest, Boeing's top quality-control executive plans to retire this year. Elizabeth Lund, named to the role in February after a door-plug blowout aboard a Boeing-made plane, will pass the job to another company veteran, Doug Ackerman.
-- Lund, a 33-year Boeing veteran, oversaw quality control for the
commercial airplanes unit. She had planned to retire this year before
being asked to develop a quality and safety plan for regulators after
that midair incident. With that plan submitted, Lund plans a December
exit, The Wall Street Journal reported.
-- Boeing needs to restart production after the eight-week strike, and was
already aiming to increase the number of 737 MAX jets it makes, pending
regulatory approval. Boeing's troubles forced it to cut thousands of jobs
and raise $24 billion in equity to boost its balance sheet.
-- Boeing shareholder and corporate spinoff expert Jim Osman wrote that
breaking up Boeing could unlock shareholder value. Boeing's commercial
airplanes division reported $7.4 billion in third-quarter sales, its
defense division reported $5.5 billion, and its services division
reported $4.9 billion. Boeing declined Barron's request for comment.
-- Splitting up worked for GE, Osman said. The former General Electric, with
a value below $100 billion after CEO Larry Culp took over in 2018, is now
GE Aerospace, GE Vernova, and GE HealthCare Technologies, whose combined
market value was more than $330 billion entering this week.
What's Next: But Boeing can't spin off or sell non-core businesses to focus on aerospace and defense, Vertical Research Partners analyst Rob Stallard said. Commercial airplanes and defense aren't profitable currently, but the services segment makes money. Bloomberg reported Boeing was considering selling part of its services business.
-- Al Root and Janet H. Cho
***
Financial Industry Bonuses Projected to Rise Up to 35%
Wall Street is set for a jolly holiday season, at least as far as bonuses are concerned. The annual payouts are projected to rise as much as 35% this year, led by bond and stock underwriting. Bankers see a busier 2025 as the prospect of lighter antitrust regulation spurs deal activity.
-- The Wall Street compensation consulting firm Johnson Associates projects
that bond underwriters will have the biggest year-end bonus jump, 25% to
35% over last year. This the first time since 2021 that year-end bonuses
will increase industrywide.
-- Stock underwriting bankers are expected to see a 15% to 25% jump, and
equity sales and trading desks 15% to 20%. In investment banking
divisions, the advisory groups will see a lower bump up, about 5% to 10%.
Hedge fund bonuses are expected to increase by 5% to 15%.
-- Virtually every sector in the industry is performing strongly this year,
except for retail and commercial banking, said Alan Johnson, the firm's
managing director. Year-end incentive pools are seen increasing up to 20%
at asset management firms, and up to 25% at investment and commercial
banks.
-- Francine McKenzie, managing director of Johnson Associates, told Barron's
that the outcome of last week's election, subsequent market rise, and
business optimism heading into 2025 "has taken some of the uncertainty
out and influenced the upper end of the ranges."
What's Next: Firms are optimistic about prospects for 2025 as banks look to extend and improve on their pipelines, specifically for M&A, Johnson said. Wall Street continues to focus on head count and efficiencies, though voluntary attrition has moderated, he said.
-- Janet H. Cho
***
IAC Weighing Spinoff of Its Majority Stake in Angi
The Barry Diller-backed conglomerate IAC, which has a history of incubating companies and then spinning them off, is considering a deal for its 85% stake in Angi, the home-services unit formerly known as Angie's List, as it works to free up capital and make money for shareholders.
-- IAC CEO Joey Levin told Barron's that the potential Angi spinoff would
allow IAC to slim its portfolio of companies and think more clearly about
its future. Angi, which it bought in 2017, would follow 10 other former
IAC-owned companies, including Expedia, Ticketmaster, Tripadvisor, and
Match Group.
-- IAC had considered buying Paramount Global, but Levin told Barron's that
IAC's next big investment is unlikely to be a large media company. He
didn't rule out the idea that IAC could increase its current 20% stake in
MGM Resorts, saying that anything is on the table.
-- An Angi spinoff leaves Dotdash Meredith, the media firm that owns People,
Allrecipes, Southern Living, and Investopedia, and MGM Resorts. Those two
entities would be the core of a post-Angi IAC. Care.com, a care services
marketplace, will be reported as a separate segment starting this
quarter.
-- IAC reported a wider-than-expected net third quarter loss of $243.7
million, or $2.93 a share, on better-than-expected revenue of $938.7
million.
What's Next: IAC said it would actively evaluate new areas to invest its capital, but attractively valued assets aren't easy to acquire in the current environment. It added that it was going to stay patient, with a high bar on new acquisitions.
-- Paul R. La Monica and Janet H. Cho
***
Climate Conference Meets Amid Expected Trump Shift
Global leaders have converged in Azerbaijan for the annual climate conference as the U.S. heads toward a new administration that has vowed to pull out of the 2015 Paris agreement in favor of a domestic energy policy centered on drilling fossil fuels.
-- If President-elect Donald Trump succeeds in his plan, it would be the
third time since 2000 that a Republican president has pulled the U.S. out
of an international climate agreement. China, at the same time, is
spending big on green energy projects across the world.
-- COP29 kicked off on Monday, but this year some top world leaders won't be
attending, including Trump and President Joe Biden, along with European
leaders such as French President Emmanuel Macron and European Commission
President Ursula von der Leyen.
-- Washington and Beijing have lead the conference in years past, including
the Paris accord, which calls for governments to limit global warming to
(MORE TO FOLLOW) Dow Jones Newswires
November 12, 2024 07:10 ET (12:10 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments