Trump’s Scoreboard Is the S&P 500, and It’s Wall Street’s Best Hope
(Bloomberg) — If Wall Street learned one thing during Donald Trump’s first term as president, it’s that the stock market is a way he keeps score. At various points he took credit for equities rallies, urged Americans to buy the dip, and even considered firing Federal Reserve Chairman Jerome Powell, who he blamed for a selloff.
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Now he’s preparing for another stint in the White House, and the market is once again a key focus. The problem is he’s also bringing a series of economic policy proposals that many strategists say raise the risk of increasing inflation and slowing growth.
So for investors who’ve enjoyed the S&P 500 Index’s more than 50% jump since the start of 2023, the best hope for keeping the market rolling into 2025 and beyond may be Trump’s fear of doing anything to damage a rally.
“Trump considers the stock market performance as an important part of his scorecard,” said Eric Sterner, chief investment officer at Apollon Wealth Management. “He regularly started his speeches as president in his first term with the question, ‘How’s your 401K doing?’ when the markets were riding high. So he clearly does not want to create any policies that threaten the current bull market.”
The S&P 500 Index took off after Trump’s win on Nov. 5, putting up its best post-Election Day session ever. A whopping $56 billion flowed into US equity funds in the week through Nov. 13, the most since March, according to strategists at Bank of America Corp. using data from EPFR Global. And the S&P 500, technology-heavy Nasdaq 100 Index and Dow Jones Industrial Average have all hit multiple records since Election Day, despite last week’s pullback.
What makes the reaction notable is Trump’s campaign promises weren’t what you’d normally consider investor-friendly. They include: hefty tariffs that will potentially strain relations with key trade partners like China; mass deportations of low-wage undocumented workers; tax cuts targeted at corporations and wealthy Americans, which are expected to increase the national debt and widen the budget deficit; and a general protectionist approach aimed at bringing manufacturing back to America, where costs are higher than they are overseas.
None of these risks is a secret, they’ve all been widely discussed in investing circles. So where’s the enthusiasm coming from? Simple. Wall Street doesn’t believe Trump will tolerate a declining stock market, even if it’s caused by one of his own proposals.
The Artificial Intelligence (AI) Boom Isn't Over. 3 AI Stocks to Buy Right Now.
The stock market has ridden the excitement for artificial intelligence (AI) to new heights. It’s not all hype; according to McKinsey, AI could add as much as $13 trillion to the global economy by 2030. Sure, some stocks have risen faster than others, so perhaps some stocks have gotten too expensive.
However, there are still top-notch AI stocks worth buying today.
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Three Fool.com contributors put their heads together and selected Taiwan Semiconductor Manufacturing Company (NYSE: TSM), Tesla (NASDAQ: TSLA), and Qualcomm (NASDAQ: QCOM) as AI stocks that merit buying right now.
Here is the investment pitch for each.
Justin Pope (Taiwan Semiconductor): If you’re looking for a surefire winner in the AI field, Taiwan Semiconductor is as good a bet as any. It’s the world’s largest semiconductor foundry, which manufactures chips for design companies like Nvidia, AMD, and others. Taiwan Semiconductor is the world’s leading foundry, holding an estimated 62% of the global market as of Q2 2024. That positions Taiwan Semiconductor to capture explosive growth in demand for AI chips moving forward.
AMD CEO Lisa Su predicted during her company’s Q3 earnings call that AI chip demand will grow by 60% annually to $500 billion in 2028, more than the entire semiconductor industry’s size in 2023. It seems safe to say that end markets worldwide, AI and otherwise, will need increasingly more chips.
At this writing, Taiwan Semiconductor stock trades at a forward P/E ratio of just under 28. At the same time, analysts estimate the company’s earnings will grow by an average of 31% annually over the next three to five years. That’s a PEG ratio of 0.9, indicating the stock is a bargain for its expected future growth.
So, why is the stock so cheap? Taiwan is near China, which claims it is part of its territory and has threatened to invade the country. This is a legitimate risk that investors should consider before buying the stock. That said, it’s impossible to know what will happen. A forceful invasion might spark retaliation from the U.S. and other countries because of Taiwan’s importance to the world’s chip supply chain. The U.S. and Taiwan Semiconductor have taken steps to derisk from China, including cutting back shipments of advanced AI chips to China and investing roughly $65 billion to build new foundries in Arizona.
Gold Loses Some Luster After Trump’s Decisive Win
(Bloomberg) — Donald Trump’s victory immediately buoyed markets from stocks to Bitcoin. Gold is going to take a lot longer to turn things around.
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In the two days immediately following the Republican candidate’s win, the precious metal’s performance was the worst in at least 13 US presidential election windows, according to Deutsche Bank. Gold prices have dropped almost 7% since Election Day, even as several other asset classes enjoy a post-campaign boost.
“When people get really interested in gold is when nothing else is working,” said Rob Haworth, senior investment strategy director at US Bank. “Equities are working well; you’re even seeing solid returns for low-quality corporate credit. So you’re less likely to seek out alternative sources of portfolio growth.”
Related: Your Guide to Trump’s Day-One Agenda, From Taxes to Tariffs
Gold’s slide is a marked turnaround for a commodity that had surged by more than 30% in the year leading up to the US vote, hitting record after record as geopolitical and economic risk drew investors in. Although longer-term uncertainty remains in place, with Trump known for his at-times wildcard positions, much of gold’s safe-haven appeal apparated after the most bullish scenario for gold — a contested election — failed to materialize.
A rallying dollar in the days since Trump’s re-election is also negative for bullion as it’s priced in the US currency. At the same time, the US economy appears to be in pretty good shape, with inflation easing and the Federal Reserve not in a rush to keep lowering interest rates.
With the rest of the US economy looking so strong right now, “gold would be a contrarian call,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management. “The sentiment right now is there’s very little risk, whether it’s fundamentally, geopolitically. These types of environments, it’s not easy to go against momentum.”
Some investors may not personally agree with the President-elect’s platform, but just knowing what to expect during Trump 2.0 has helped remove some of the recent uncertainty that helped propel the precious metal to new highs. The confirmation of a Republican clean sweep also means there’ll be more leeway to carry out the policies he telegraphed on the campaign trail. Trump’s agenda, ranging from tax cuts to financial deregulation to tariffs, has hedge funds piling into sectors that could benefit, including large-cap banks and domestic industrials.
Here's How A Bitcoin Whale Nets $179M From A $120 Investment
A Bitcoin BTC/USD investor has demonstrated the potential of long-term investment in digital assets by turning a mere $120 into a staggering $179 million over a 14-year period.
What Happened: A Bitcoin whale moved 2,000 Bitcoin, now worth $179 million, which had been untouched for 14 years.
Blockchain data indicates that the whale received the coins in 2010 when they were valued at just $0.06 each, making the total value of the coins at that time $120.
The investor transferred the Bitcoin to the American crypto exchange, Coinbase, last week, after seeing their holdings appreciate by nearly 150,000,000%. This move is presumed to be a step towards selling the digital asset.
Currently, Bitcoin is valued at $90,476, according to Benzinga data. It reached an all-time high of over $93,000 last week, marking an increase of about $20,000 since Election Day.
Why It Matters: Bitcoin whales, as they are known in the crypto world, are investors who accumulate large amounts of digital coins and hold onto them for years, watching their value increase exponentially.
Despite short-term volatility, Bitcoin typically appreciates more than most other assets in the long run, yielding substantial returns for those who hold onto it, known as “HODLers.”
This story serves as a testament to the potential of long-term investment in digital assets.
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Scaramucci: Trump’s Crypto Support Could Push Bitcoin To $150K
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Philippines launches interest rate swaps market to boost bond liquidity
MANILA (Reuters) – The Philippine central bank announced the launch on Monday of an interest rate swaps market anchored to a newly established benchmark rate to enhance bond market trading and liquidity.
The start of IRS transactions follows the recognition by the International Swaps and Derivatives Association of the benchmark – the overnight reference rate (ORR) – which the Bankers Association of the Philippines helped establish.
IRS, a fixture of developed fixed-income markets, lets parties manage rate risk or bet on the direction of borrowing costs by exchanging fixed and floating interest rate streams.
The ORR, to be based on the central bank’s daily reverse repurchase auctions, is expected to provide a better benchmark for pricing loans, now based on yields from thinly traded government securities.
“We are excited for PESO IRS to go live to help boost transactions, create a benchmark yield curve, and deepen our capital markets,” central bank Governor Eli Remolona said in a statement. “A benchmark curve will help banks and other lenders price loans at various maturities.”
Sixteen banks have committed to be market makers for the ORR-based IRS, ensuring pricing across maturities from one month to 10 years and enhancing interest rate transparency, the central bank said.
Bangko Sentral ng Pilipinas also said it was working on adopting global master repurchase agreement contracts that will allow banks to access treasury bonds for repo transactions to boost the government securities repo market.
(Reporting by Karen Lema; Editing by William Mallard)
Energy Stocks Have Soared This Year, but, These 3 Still Look Like Great Buys
The stock market has been roaring this year. Most sectors have rallied, including energy. The average energy stock in the S&P 500 is up more than 10% this year.
Despite that rally, several energy stocks still look like compelling buys. Chevron (NYSE: CVX), MPLX (NYSE: MPLX), and Occidental Petroleum (NYSE: OXY) stand out to a few Fool.com contributors as great buys right now. Here’s why they think these energy stocks could supply investors with high-octane total returns from here.
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Reuben Gregg Brewer (Chevron): When it comes to integrated energy majors, Chevron is easily one of the elite group leading the pack. It is large, with a market cap of $275 billion. It is diversified across the upstream (production), midstream (pipelines), and downstream (chemicals and refining). It is financially strong, with a debt-to-equity ratio of only around 0.17 times (one of the lowest of its closest peer group). And it has an over three-decade history of annual dividend increases.
And yet, it has lagged behind the energy rally over the past year and is well behind ExxonMobil, its closest U.S. comparison point. The problem is a bit unique since Chevron is in the middle of trying to buy Hess, and Exxon appears to be standing in the way. Exxon’s partnership with Hess in a major oil project is what’s holding things up and could even scuttle the deal. Investors are likely treading carefully with Chevron right now, worried that the deal falling through would result in slower growth for Chevron. That’s not unrealistic.
But Chevron isn’t a stock you look at for the short term but one you buy for the long term. Even if Exxon throws a wrench in the Hess deal, Chevron can simply shift gears and find another acquisition target. Maybe that takes a little time, but losing Hess won’t derail Chevron; it will just slow it down temporarily. Thus, the laggard stock performance today could end up being a buying opportunity. And you’ll get an attractive 4.2% dividend yield while you wait for all this to get sorted out.
Matt DiLallo (MPLX): Units of MPLX have gained about 25% so far this year. Even with that surge, the master limited partnership (MLP) still looks like an attractive investment.
Despite the MLP’s roaring rally this year, it still offers a high yield of more than 8%. That’s due to a combination of valuation (which is still relatively low at about 10 times earnings) and continued distribution growth. MPLX recently increased its distribution by another 12.5%, marking its third straight year of double-digit distribution increases.
The Ultimate High-Yield Utility Stock to Buy With $1,000 Right Now
There are some utilities that Wall Street knows quite well because they are so large and influential, like NextEra Energy (NYSE: NEE) or Southern Company (NYSE: SO). Then there’s a company like Black Hills (NYSE: BKH) that few will recognize. That’s too bad because Black Hills still has a generous yield and a way more impressive dividend history than either NextEra or Southern.
Here’s why Black Hills stock might be the ultimate place to invest $1,000 (or more) right now, even after an impressive utility sector advance.
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From a big-picture perspective, Black Hills is a pretty boring regulated utility business. It provides natural gas and electricity to around 1.3 million customers in parts of Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming. Black Hills does exactly what you imagine — it provides energy to its customers reliably and consistently. It doesn’t have a separate business building renewable power like NextEra, and it isn’t working on a giant capital investment like the nuclear power plants that Southern just completed. Black Hills does the basics and does them well. This is probably one of the reasons why Black Hills is a relative unknown on Wall Street.
There’s also the matter of size. The customer base isn’t huge, and neither is Black Hills’ market cap. At just $4.5 billion, it is a rounding error relative to industry giant NextEra, which has a market cap of over $150 billion. Even Southern is much larger with its $95 billion market cap. A company doesn’t have to be large to be a good company, though size can help when it comes to accessing the capital markets. Still, being a small and reliable regulated utility isn’t a bad thing.
Notably, Black Hills operates in reasonably attractive regions. Management likes to highlight that the company’s customer growth is expanding roughly three times faster than the U.S. population. More customers means more revenue and more need for the types of capital investments that regulators like to approve. In other words, there’s a long-term growth catalyst supporting Black Hills’ business.
Here’s where things get interesting. If you like stocks that have rapidly growing businesses, you probably won’t like Black Hills. It is more of a slow and steady tortoise. Dividend investors will probably love it. Black Hills is a Dividend King, a highly elite group of companies that have increased their dividends year in and year out for 50 or more years. Black Hills’ streak is up to 54 years and counting. Neither NextEra nor Southern can make anything close to this claim.
Why Younger Boomers Are Saving Less – And How to Build a Solid Retirement
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Younger baby boomers significantly lag older baby boomers in retirement savings by an average of more than $50,000, according to a new study from the Center for Retirement Research at Boston College. The study attributes the lag in savings to the 18-month-long Great Recession and, to a lesser extent, the changing demographics of younger baby boomers.
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The research focuses on the retirement savings of those born from 1946 to 1964. It finds that the youngest cohort of this generation, those born from approximately 1958 to 1964, have combined retirement assets averaging $299,700 – including pensions, Social Security benefits and personal savings averaging. By contrast older baby boomers have an average of $350,000 or more.
The researchers used the Health and Retirement Study to look at actual patterns of wealth accumulation by cohort and the Survey of Consumer Finances to gather insights on the experience of older boomers over their work life.
The study attributes the relatively low level of retirement savings by late baby boomers to two factors, the Great Recession, which started in late 2007, and the changing demographics of younger baby boomers.
Before the end of the Great Recession in June 2009, unemployment soared to 10%, hitting many younger boomers – aged 42 to 49 at the time – during their peak earnings years. Even those who managed to keep their jobs faced losses, as many employers slashed salaries and stopped matching employer contributions to workplace 401(k) retirement accounts.
The link between work and wealth accumulation declined significantly for younger boomers, compared to older boomers, reducing their retirement wealth by $55,600 more, the report says.
The decline in wealth, the study concludes, “is a Great Recession story.”
The study also attributes some of the difference to demographics: A higher percentage of Black and Hispanic households comprise the younger baby boomer cohort.
“Black and Hispanic households have less wealth than White households, so when they increase as a share of the total population, average cohort wealth will decline,” the report states. “Similarly, a decline in the percentage of households married or with a college degree will bring down the average. These changing demographics, along with a decline in work activity, accounted for 29 percent of the total decline.”