Trump 2.0 – So Far, So Good For Markets

Authored by Peter Tchir via Academy Securities,

We are only a few days into Trump 2.0, but so far, so good.

This administration is more fully staffed on day 1 than the last time and is filled with people who are committed to his causes. That is an important difference as the level of preparation out of the gates is materially different. Depending on which direction the administration goes, this might be good or bad, but make no mistake, Trump 2.0 is far more prepared and ready to act.

We’ve had the first (of what could be many) “personality clashes” in the administration with Ramaswamy stepping away from Musk and DOGE. With so many prolific, high energy individuals, we should expect to see clashes. The only one that could manifest itself and be tough for markets would be if the Trump and Musk relationship goes sideways. There is a comfort level associated with the richest man in the world helping form and guide policy – from a markets perspective. If that gets tested, it could be trouble, but so far, so good.

Trump seemed almost like two different people. One, very “presidential” at the official inauguration, the other, far less so, promoting an almost “campaign-like rally” atmosphere at later events on Inauguration Day.

Many of the topics we discuss are related to issues covered in more detail (along with our outlooks) in Geopolitical Risks and Opportunities in 2025. So far, from the policy side, we have seen:

• Some chatter on tariffs, but little being done. It seems obvious to everyone now that this has become a negotiating ploy. He talks about it to rally his supporters but is listening to those who caution him about being too aggressive or too pre-emptive. It looks like we are just starting the negotiations. Have said that, be prepared to see some retrenchment on Trump’s part, though at this point, it might take actual actions rather than words to move markets.

• Immigration policy seems to be starting off “reasonably” well (in my opinion) – enforcing the borders, etc. There is very little obvious attempt to round up millions of people, especially law-abiding people, to deport them. I like the tactic of elevating the drug cartels to terrorist organizations, as that could be a big step towards Mexico and the U.S. really taking them down. That would solve so many issues (we’ve discussed “ungoverned space” in this context as well). A solution to the cartels helps the U.S. and Mexico and would set the stage for real growth.

• China. Trump seems to want to make a “deal.” No day 1 tariffs. No ban on TikTok. Bizarrely, this makes me nervous as I expect China to try to find a deal that provides them time. That lets them get through their current economic issues, while setting them up for the future (from AI, to high tech, to controlling shipping, to selling their brands globally – with the backing of China Inc.).

• AI and compute. The investments announced yesterday are very positive. What is possibly as important as the investments is the signal that those investors/investments are sending. There is a “bandwagon” building and people want to get on it. That could propel forward similar plans from others. I’m hearing about the “Roaring 20s” more and more in my conversations. This area might benefit further from Trump’s desire to deregulate (though I’m not sure if we will like the results, as so far, the U.S. has seemed pretty even handed in its regulation – unlike Europe which hurts the industry time and again).

• Crypto. With the SEC setting up a crypto commission. With the pardon of the Silk Road founder. With the launch of multiple meme coins (for the president and those surrounding him). With all those “withs,” it seems plausible that a serious push is being made for a crypto reserve. It makes zero sense to me, but I wouldn’t fight it. While this might be a stretch, the contributions from the crypto community might be the single biggest force in U.S. politics. SBF clearly influenced the midterms before he fell. The crypto community clearly influenced the last election, and I expect they are just spreading their wings. Lots of access to wealth (some of which may not be traceable), potential new means of generating wealth for those they want to support (meme coins), a passionate goal (higher and higher crypto prices), and in many cases, some flair. Every politician must be thinking (or should be thinking) about how to tap into this force! I have not bought any crypto (or crypto ETFS) since the election, but am tempted to, because regardless of whatever I think, there are a lot of supporters in his inner circle in addition to the donors pushing hard.

• Peace through Strength. I’ve seen little on the military front that has caught my eye. Though I believe that we will see successes in the Middle East and with Russia and Ukraine. We will return to a state where U.S. deterrence does just that – deter! See Bloomberg TV Last Week – Trump’s Defense Chief Must Restore U.S. Deterrence. I am going to be adding some European stock ETFs to my portfolio in the coming days, on the back of this expectation, along with positioning.

• Commodities. From “drill baby drill” to “refine baby refine,” we are in the early stages of actions that will change the commodity space. The president (rightfully so) argues that lower energy prices will keep inflation lower. I agree as energy prices affect everything from manufacturing costs to delivery costs. More broadly speaking, it results in lower commodity prices, lower prices for goods, and potentially services as well (as a byproduct of servicers spending less on the equipment they need). I don’t like owning the commodities, but the commodity producers should do well, though that might be tricky. Companies supplying the goods and services producers need should also do well. This includes anything from heavy equipment makers, to oil field servicers, to anyone in infrastructure. As awful as the fire in Los Angeles is, it may help set the stage for changing the regulations. This is all part and parcel of infrastructure spending.

• The Deficit. I see zero progress on this front, but for the past few trading sessions, the bond market has ignored the risk. Trump’s calls to abandon the debt ceiling were completely dismissed. The efforts to keep commodity prices down have probably helped, along with reduced fears of a tariff war. Having said that, look for yields to rise again, with my target being 4.9% on 10s.

• Work from Office. I like commercial real estate here as everywhere I look, work from home is going back to being a luxury for the employee, rather than a requirement that employers are forced to offer.

• Chips and Space. Nothing is jumping out so far, but I expect to hear more in the coming weeks, along the lines of what we’ve outlined.

So far, so good, but don’t forget the theme of 2025 – “messy” so as things look rosy, prepare for some negative headlines, and when things seem gloomy, expect the narrative to change more positive.

It should be an interesting year, but so far, so good for markets.