The Trump Effect

It hit 6,000! Briefly on Friday, the S&P 500 crossed this milestone, capping off its best week of 2024. The markets surged, powered by a post-election wave of optimism—but the usual themes of rate cuts, inflation, and growth bets still took center stage.

For the first time since August, all 11 sectors in the S&P 500 closed the week in the green. Leading the charge was consumer discretionary, fueled by Tesla’s impressive 29.3% gain. Tesla stood out as the only “Magnificent Seven” tech stock to finish Friday in positive territory, while Alphabet and Amazon dipped slightly, hinting at some caution in big tech as investors eye the path ahead.

⚡ Closing Bell:

• Dow Jones: ⬆️ +0.6% to 43,989 on Friday; up +4.6% for the week —
  Strong gains as investors warm up to a Trump-led economy.

• S&P 500: ⬆️ +0.4% to 5,995.5 on Friday; up +4.7% for the week —
  Keeping steady in the middle, lifted by utilities and real estate while tech takes a breather.

• Nasdaq Composite: ⬆️ +0.1% to 19,286.8 on Friday; up +5.7% for the week — Just a gentle nudge upward as tech stocks cautiously eye their next move.

Buy the Rumor, Sell the Fact

The Fed delivered the rate cut, and Treasury yields dropped fast as investors locked in profits and paused selling after Trump’s election win. Both the 10-year and 30-year yields posted their biggest weekly drops since September—a classic “buy the rumor, sell the fact” moment as the bond market digested Trump’s return and the Fed’s dovish shift.

• 10-Year Yield: ⬇️ -2.7 bps to 4.316%

• 30-Year Yield: ⬇️ -5.7 bps to 4.486%
  

Flat ────

Friday’s bond market saw a sharp flattening of the yield curve as traders adjusted positions. The gap between 2-year and 10-year yields narrowed to 4.2 basis points—its flattest level in a month. While many have been betting on a steepening curve as the Fed eases, Friday’s moves signaled caution.

• 2-Year Yield: ⬆️ +3.8 bps to 4.258%

With CPI and PPI data on deck next week, the bond market’s next steps remain data-driven.

A Weary Dragon 🇨🇳:

China 🇨🇳 is navigating rough waters as Trump returns to the White House with promises of steep tariffs on Chinese goods. The stakes are high, with China’s economy already under pressure from a slowing property market, rising local debt, and disappointing post-Covid growth.

China’s Response: To counter its sluggish economy, China plans a 6 trillion yuan ($840 billion) boost to bail out debt-heavy local governments. This funding aims to prevent local debt from further stalling economic growth, especially as Xi pushes China’s shift to tech-driven industries.

Old Strategy, New Challenges 🔋📦

For decades, China’s economic model relied on exports and massive infrastructure investment. But today, some experts warn China could face a “Japan-style stagnation” unless it pivots toward a consumer-driven economy, focusing on tapping into domestic demand rather than exports. This shift could help China reduce trade tensions and bolster growth from within.

China has a stronghold in key industries like clean energy and EVs, but tensions with Western economies mean Beijing may need to ask: are the latest measures enough to offset a renewed trade battle with the U.S.?

The Challenge Ahead 🚧

• Growth Projections: The IMF projects China’s growth will slow to 4.8% in 2024 and 4.5% in 2025—well below pre-pandemic levels.

• Trade Tensions: China’s success in clean energy exports (solar panels, EVs, lithium batteries) is now meeting resistance from Western economies. The EU recently imposed tariffs of up to 45% on Chinese-made EVs.

Danke schön 🇩🇪:

Shares of Rheinmetall, Germany’s largest munitions maker, have soared 16% since Trump’s election victory. Why? Traders are betting on a big boost in European defense spending, fueled by Trump’s tough stance on NATO allies to increase their military budgets.

• Background: Trump’s history with NATO has always been combative, often demanding Europe “pay its fair share” in defense. In 2022, Russia’s invasion of Ukraine already ramped up European defense budgets, and Trump’s re-election has only added momentum.

• Rheinmetall’s Growth: The company reported a 40% jump in quarterly sales and expects record-breaking revenue this year, driven by heightened demand for military equipment across Europe.

For investors, it’s clear: Trump’s return to the White House signals even bigger spending on European defense, and companies like Rheinmetall are riding that wave.

Trend it, don’t end it :

Trump’s promise to make the U.S. “the crypto capital of the planet” has sent Bitcoin soaring to new highs, nearly reaching $82,000.

BlackRock’s iShares Bitcoin Trust led a record-breaking inflow of $1.1 billion on Thursday, while total Bitcoin ETF inflows hit ≈$1.4B —the largest single-day volume since January.

Driving the excitement? Trump’s plan to fire SEC chief Gary Gensler on day one. Under Gensler, the SEC led a major crackdown, hitting Coinbase, Kraken, and Binance with lawsuits, fines, and investigations. With Trump’s new approach, Coinbase and others are hoping for a “fresh look” at crypto’s regulatory burden.

Meanwhile, pro-crypto influence is rising in Congress, with 253 crypto-friendly lawmakers in the House and 16 in the Senate.

Phew! 😮‍💨

TikTok might catch a break. Biden’s administration had signed a law requiring TikTok’s sale or risk a U.S. ban by January 2025, but Trump’s stance has evolved.

• Trump’s Twist: Previously keen to ban TikTok, Trump now opposes it, possibly due to his feud with Meta and Zuckerberg. He believes banning TikTok would boost Facebook, which he sees as the “enemy of the people.”

• Powerful Allies: Enter Jeff Yass, a major GOP donor and TikTok stakeholder. His firm’s stake in ByteDance, TikTok’s parent, is worth $40 billion—a stake that’s at risk if TikTok faces a ban. Yass has reportedly lobbied Trump to ease off TikTok.

With Trump back in office, TikTok may have its best shot at dodging a ban.

🧩 Movers:

• Axon ⬆️ +28.7%: Blew past earnings and raised revenue forecasts.
  Known best for its Taser stun guns, body cameras, and digital evidence software. With its recent acquisition of airspace security leader Dedrone, Axon is now expanding into drone defense.
  → Revenue? ✅ – $544.3 million, up 32% year-over-year
  → Earnings? ✅ – $1.45, beating the expected $1.20
  → Full-Year Forecast: Targeting $2.07 billion in revenue and $510 million in EBITDA for 2024

• Fortinet ⬆️ +10%: Delivered a strong Q3, second-best on the S&P.

• Tesla ⬆️ +8.2%: A whopping 29.3% weekly gain, lifting consumer discretionary. Market bets Tesla stands to gain from Trump’s win, pushing its market cap over $1 trillion.

• Airbnb ⬇️ -8.7%: Q3 earnings plummeted, posting the Nasdaq’s largest drop.
  The short-term rental giant saw a quick jump of 11% after its Q3 earnings, but excitement faded fast, leaving shares in the red.

  → Revenue? ✅ – $3.73 billion, up nearly 10% year-over-year
  → Earnings? ❌ – Missed by a hair, with EPS at $2.13 vs. $2.14 expected

  Investor Reaction: Initial optimism turned sour. A penny miss was enough to take the shine off an otherwise solid revenue report.

• Akamai ⬇️ -14%: Lowered full-year outlook, worst performer on the S&P.

Commodities Check: ✔️

• Crude Oil ⬇️ -2.67% to $70.430 per barrel 1.93

• Gold ⬇️ -0.83% to $2,684.52 per ounce

• Silver ⬇️ -2.25% to $31.290 per ounce

The Dollar :

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#TRUTH:

❗”Behind every great man is a woman rolling her eyes.”😃 — Jim Carrey

The stinger

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