Eye On The Market

From Here to Eternity

From Here to Eternity: tracking Trump’s economic, market and constitutional milestones

Whether you’re elated or despondent about the blizzard of changes taking place in Washington, let me remind you of something: two years is an eternity in US politics. In this month’s note, we include a Trump policy impact tracker, and an assessment of the statutory and constitutional challenges that Trump policies face as the administration explores the outer limits of executive power.

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Inauguruption: the flurry of Trump 2.0 executive orders

Trump 2.0 is a hodgepodge of distinctly American political strains: the bare-knuckled nationalism and anti-elitism of Andrew Jackson, the tariff-loving protectionism of William McKinley, the small-government/pro-business policies of Calvin Coolidge, the unforgiving enemies lists of Richard Nixon, the deportation policies of Dwight Eisenhower, the manifest destiny of James Polk and the isolationism of 1914-era Woodrow Wilson. American First policies announced yesterday create risks for investors since its supply side benefits collide with its inflationary tendencies; there’s not a lot of room for error at a time of elevated US equity multiples.

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Eye on the Market Outlook 2025: The Alchemists

Deregulation, deportations, tariffs, tax cuts, cost cutting, crypto, oil & gas, medical freedom and Agency purges: What could possibly go wrong? Sections include the AI Golden Goose, the invisible nuclear renaissance, DOGE Quixote, the two China traps, Dr. Seuss goes to Europe, a crypto update and the 2025 Top Ten list.

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The Year of Living Dangerously

I was visited by six ghosts recently warning me of dangers related to predictions, allocations, apparitions, legalizations, expurgations and ablations. Here’s what they said.

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"Kamilton": the 2024 election and who tells your story

A reflection on the 2024 election and who tells your story. On Trump’s victory: market implications of a supply side boost from deregulation clashing against inflationary impulses of tariffs and deportations. The ten year Treasury will be the most reliable barometer of all. To conclude, an ode to vaccines and an RFK bibliography.

The Thucydides cap on the China equity rebound trade

For participants in the China equity rebound trade: once you hit your return targets, take the money and run.

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Mind the Gap: a historically polarized US election

Candidate policy comparisons in a historically polarized US Election; China stimulus package

The US is about to conduct its most polarized Presidential election in 100 years. Today’s note looks at candidate policy differences and implications for investors: government spending, taxation, tariffs, trade, immigration, regulation, NATO, energy, price controls and the Electoral College. We conclude with analysis of the China stimulus package, which might have a better chance of succeeding than recent failed efforts.

A severe case of COVIDIA: prognosis for an AI-driven US equity market

NVIDIA and its GPU customers are now a large driver of equity market returns, earnings growth, earnings revisions, industrial production and capital spending.

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There’s no place like home

A surge in the Japanese Yen is resulting in home repatriation of Yen-funded positions overseas, and close-out of Yen-funded positions abroad. While Google was found guilty of home bias anti-competitive search engine behavior, any judicial remedies may be worse for recipients of Google’s “shelf space” payments than for Google itself. Work-from-home trends have plateaued at ~30%, which has important implications for distressed office investors. Most distressed sales now require discounts of 60%+ vs pre-COVID levels; the fundamentals of the office sector explain why.

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The Lion in Winter

From 1930 to 2010, there were six extended periods of small cap outperformance as it dominated large cap over that entire period. But since 2010, small cap sits alongside value stocks and non-US stocks in the unholy trinity of underperforming portfolio strategies. While poor profit fundamentals argue against a prolonged period of outperformance vs large cap, small cap stocks are at their cheapest levels in the 21^st century with potential market and political catalysts in their favor. First, a few words on the CrowdStrike outage.

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