An impressive comeback by Donald Trump swept all seven swing states with the Republicans in ascendant flipping and capturing the US Senate. To top it off, there is a high probability that the GOP will take the House too by Nov 14 when this column is published. Control of the House typically gives the power to initiate spending bills and initiate impeachment proceedings against officials, including the sitting president — a spectacle we have witnessed from time to time, whether against Bill Clinton or Trump himself, twice.
As counting trickles down, it looks like it would also be the first time in 20 years that a Republican President is elected on the majority of the popular vote. Hillary Clinton in 2016 did actually get 2.9 million more votes nationally.
With exit polls showing a more than threefold increase in the Black vote (13%, up from 4% for John McCain in 2008), a 50% increase among Latinos (46% versus 31% for McCain in 2008), and even 43% of voters under the age of 30 supporting Trump compared to 32% for McCain in 2008, it is clear that Trump’s base is broad across America.
The Supreme Court is already six to three, appointed by a Republican President and three by Trump. This means there will be no more gridlock amongst all three branches of government. The US will be in a position to make significant changes at will. And with Trump clearly wanting to “drain the swamp”, former acolytes who used to work for him, including Mike Pompeo and Nikki Haley (who for a while tried to run against him), are considered part of the deep state — and have been ruled out by him already in the new administration.
The US has a chance to make forceful changes, and with the Supreme Court ruling earlier in the year that anything done in the official capacity of the President has immunity, we can only expect the unexpected.
The choices that result — whether higher tariffs, exporting immigrants back across the border or forcing Ukraine to cede territory for peace are meant to be good for Americans since it is the democratic outcome of their choices. Silicon Valley bros and venture capitalists and mercurial mavericks like Elon Musk (who may have a role in the coming administration) may rule.
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The super strong currency of the US dollar (backed by China, Japan and the rest of the world buying their debt) may be augmented by America minting more crypto of any “Doge” fashion.
Given how Kamala Harris was criticised for not supporting the Palestinians enough, it was ironic that one of the first world leaders who sent congratulations was Benjamin Netanyahu, who promptly disposed of his defence minister Yoav Gallant on Nov 5 after the latter called for prioritising hostages and peace, aligning with the Biden administration’s position.
But what would this US political hat-trick herald for the rest of the world?
Risk assets party on
There was indeed volatility as the results dawned on the rest of the world before the US markets reopened. So resounding and clear it was heading, Harris cancelled her watch party fairly early on, even if it took another day for her to call to congratulate Trump and concede.
But there was a risk on volatility, as US stock indices made record highs, the Nikkei rallied even if the yen eased a tad, making the final days of my sojourn in Japan a little bit cheaper, and the Lion-Nomura Japan Active ETF eked out a small gain. Bitcoin (past US$80,000 or $106,722) and all things crypto made new highs; the depths of the extended winter from October 2022 appear long forgotten.
Our own Straits Times Index (STI) roared back coincidently to a recent high of 3724.37 points on Nov 8, backed by the sterling 3QFY2024 earnings of DBS Group Holdings on Nov 7, followed by Oversea-Chinese Banking Corp and United Overseas Bank U11 ’s a day later.
Having waited closer to 3,500 points for reentry into the ETF, I did not buy during the wobble prior to the election, which took it only to 3,540. At the level at the close of Nov 8, we are venturing close to the all-time high 3,800 category led by the 3 banking heavyweights, aside from Singapore Telecommunications Z74 , which staged a mild recovery back into the $3.20s after its recent correction to the $3.10s, the rest of the sectors including industrials and non-sexy tech plays here have stayed behind.
If we make a run to break 3,800 points before the global equity party sobers up, the laggards will have to catch up — much like each of the earlier breaks to 3,500 and 3,600 this year — there could be select risk on opportunities temporarily left behind in Singapore including Venture Corp, Sembcorp Industries U96 or Keppel.
In the meantime, the REIT correction deepened as fears about the future direction of interest rates and risk on momentum saw liquidity ebb from the yield-based sectors, which is where I was positioned to be defensive on any downside. Bummer. But I will thus sit back on a mark to market down on these securities and clip the 6% to 7% yields.
Along the way, for many with discounted NAVs, I hope some gains will be realised from corporate activities of asset sales if this risk-on-trend is well supported. However, things may come to a head when the new administration actually takes over. I may reserve residual cash to average down a tad before the next turn but will still not be in a hurry even if the US Fed cut another 25 basis points right after the election.
The only other market or sector that stayed relatively muted, all things considered, is China. There was a mild pop-up in the Hang Seng Tech Index compared to the October Golden Week, where false dawn heroics sent the index up almost 60% in a week. The market is torn between the hopes for a “Deal of the Century” with Trump and the threat of more tariffs. Perhaps that is exactly how he wants it — the “Art of the Deal” (the name of his 1987 book) to keep everyone guessing.
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Will it just be turkeys by Christmas?
I have been consistently refusing to be drawn into global speculative trades in the West, such as artificial intelligence, Tesla and cryptos, even as they keep coming back each time to scale new peaks. Let’s not forget the volatile correction that took them down the elevator by up to 30% fairly quickly. I might have missed out on some of the exciting returns, but I am still not suffering from Fomo trades.
Perhaps this section will sound like the sour grapes of a “long-term investor” whose conservative choices are temporarily out of fashion. However, as the shorts cover and run and the bulls come out, it is worth anticipating or hypothesising what happens come January.
As market discounts and prices for pricier interest rates in anticipation of a “print and spend” Republican administration, or a slowdown in US Fed chairman Jerome Powell’s easing posture based on weaker recent economic data and a soft-landing hope next year for the US economy originally, it will overshoot in the near term.
The exceptionally rare political hat-trick will continue to embolden Silicon Valley VCs and Trump tech bros past Thanksgiving when the first turkeys are rolled out for the season. With festive mirth and merriment, this glow will likely carry on whilst thin markets may stretch it further through mid-December.
After such an extended run in 2024, there may be some Western take profit selling as funds, having already shown good numbers for the year, lighten up. The excuse could be the uncertainty of Trump’s official selection of his team.
While Republican Presidents tend to be seen as pro-business and markets, let’s not forget that the massive equity runs in the US in 2021 and then from mid-2023 came about under Democrat Biden and that the 2008–2009 global financial crisis came about in the wake of (Republican) George W. Bush’s second term. Trump’s 2016 adventure too petered out by the end, taking equity markets as a measure of economic metrics like unemployment or GDP growth using these two periods.
So, a continuation of the raging bull since 2023 that has been overextended in the US seems unlikely. Something will give, save that it could be one of any number of pins in a Trump administration, which is likely to be typified with uncertainty.
Whilst Trump is a strong dollar advocate, his actions have not always matched the talk. If trade barriers are raised and immigrant labour is constrained, that might add to inflationary costs — in the US and eventually hurt its economy, which appears to be already slowing down. A hoped-for soft landing could be hard.
Stagflation is hardly inspiring in the US equity market if we recall the 1970s. If the Fed is allowed to operate purely on data, rates will continue to fall in time. Trump, the businessman, hates high rates and has pressured the Fed before! If so, the momentum back to the US dollar will reverse, as will the current global equity paradigm. Without the outflow from the US, our own STI may struggle to cross the 3,800 points hurdle significantly. It is still, however, a safer, steadier and less risky bet to bring home a nice turkey not just for the coming Christmas, with the dividends at least.
By sheer coincidence, three strikes in a role for bowling is a “turkey”, much like a single individual scoring three goals in a football match — a hat-trick. It is also more common to see turkeys in a bowling alley than hat-tricks in football. I keep my vote for consistency over chance.
Chew Sutat retired from Singapore Exchange S68 Stock Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange, and he was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
