Trump Victory a Big Win for Cryptos, Small Cap Stocks — USD?

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Wednesday, Nov. 6. The Bottom Line segment of today’s podcast starts at (4:02) followed by Stocks On The Contrarian Radar©️ at (6:15) feat GLD 0.00%↑ for listeners who want to skip ahead.

State of Play

The election is over. Trump won. That is going to have broad impacts, not all of which are apparent yet. As we eye our board of indicators for signs of direction at 0630, the early move is clearly to risk-on:

• Cryptos are the biggest early winner, with Bitcoin surging 8% to trade around $74,000. That’s actually a bit off the high north of $75,000 from earlier;

• Stock index futures are pointing to major gains, led by small caps. The Russell 2000 (IWM 0.00%↑) is up 6%. S&P 500 (SPY 0.00%↑) futures are 2.3% to the good with the Nasdaq up 1.7%;

• Bonds are selling off. The 10-year yield is up 18 (!) basis points to 4.47% (yields move inversely to prices);

• Commodities are also moving lower. Copper down 2.8%. WTI crude oil down 1.4% to trade around $71/barrel. Gold and silver are down 1%+.

Image by Author via OpenArt.ai

Today’s Known Events

Some earnings are already in:

• Ozempic maker Novo Nordisk (NVO 0.00%↑) appears to have raised guidance and that stock is up 6% in the pre-market at the time of this writing;

• Celsius Holdings (CELH 0.00%↑), the beverage of choice of millennial anorexics, missed estimates and is down 4% in the pre-market;

• Toyota Motor (TM 0.00%↑) results appear to have been mixed. The stock is down a bit;

• CVS Health (CVS 0.00%↑) results were mixed but the stock is moving higher.

After the close at 1600 we’ll hear from:

• British semiconductor manufacturer Arm Holdings (ARM 0.00%↑);

• Wireless technology company — and AI technologist — Qualcomm (QCOM 0.00%↑);

• e.l.f. Beauty (ELF 0.00%↑);

• AMC Entertainment (AMC 0.00%↑);

• LatAm online marketplace MercadoLibre (MELI 0.00%↑).

The Bottom Line

As noted, the immediate impact of Trump’s victory appears to be a broad move to the riskiest of risk assets. Cryptos being Exhibit A. Small caps are forging ahead. You also have Tesla (TSLA 0.00%↑) soaring overnight. Meme stocks are up too, but less.

The losers include all things renewable energy, with solar stocks taking it on the chin overnight. The Invesco Solar ETF (TAN 0.00%↑) is down 9% at the time of this writing. Big oil, on the other hand, is gaining ground with Exxon Mobil (XOM 0.00%↑) and Chevron (CVX 0.00%↑) up 3% each at the time of this writing.

Financials are winners as well. Not just big names like JPMorgan Chase (JPM 0.00%↑) and Bank of America (BAC 0.00%↑) (up multiple percentage points) but regional banks. The SPDR S&P Regional Banking ETF (KRE 0.00%↑) is up 8% overnight.

Another loser: China. The iShares China Large-Cap ETF (FXI 0.00%↑) is down 2%+. Names like BABA 0.00%↑, JD 0.00%↑, and PDD 0.00%↑ are moving lower.

Just keep in mind that the immediate reaction to political events is not always the right one. In 2016 at this time there was a broad sell-off. One can expect things to be volatile, especially as retail investors take short-term gains…

Stocks Commodities On The Contrarian Radar©️

There has been a pullback in gold overnight, a likely result of the ‘strong dollar’ trade ushered in by this Trump victory. There are three problems with this trade, however:

1. Trump has railed against USD strength;

2. Trump’s policies are widely expected to be inflationary. You’ve seen the resulting sell-off in bonds. That means a weaker USD;

3. The Federal Reserve is cutting rates, which is also bad for the USD.

One would expect all of this to, in time, be good for gold. During Trump’s first term the precious metal rallied by 55%. Past performance is not always a guide to future results, but gold tends to do well under Republican administrations (+215% in eight years of George W. Bush).

Make no mistake, though: gold has been on a massive tear all year and only recently pulled back from all-time highs:

Still, if gold keeps dropping it may present a buying opportunity keeping items 1-3 above in mind.

Full disclosure: The Contrarian owns some physical gold as well as SPDR Gold Shares ETF (GLD 0.00%↑) in a retirement account.

Housekeeping

• Obviously this is not investment advice (duh). Do your own research, make your own decisions.

• Read this month’s portfolio update letter here. The Substack chat tracks The Contrarian’s trades in (almost) real time.

• If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.

• Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).