Trump Trades 💹💹

Welcome to Alternate Universe!

In today’s edition:

• Trump Trades 💹

• Job opportunities at recently funded European startups 👇

• Seed valuations are now double what they were 6 years ago 🤯

The Crux 🔴

Rollercoaster Ride 🎢

The US Presidential election is one of the most anticipated events in politics.

Every four years, the spotlight turns to the candidates vying for control of the world’s largest economy.

Changes in political parties and their respective ideologies can significantly impact economic and foreign policies, and consequently, the markets.

Throw a candidate like Trump into the mix, and the contest becomes even more gripping.

Recently, the election race has been full of twists and turns.

Entering the 2024 presidential race, Trump wasn't initially seen as a strong contender for the White House.

However, Biden’s disoriented appearance in the CNN debate, coupled with the attempted assassination, created a perfect storm for the Democrats and significantly boosted Trump’s chances.

As a result, his odds have now soared to 60%.

With Biden officially out and Kamala Harris becoming the lead Democratic candidate, Trump’s chances remain high.

I aim to highlight stock beneficiaries in the event of a Trump victory. Predicting an exact trade based on Trump’s unpredictable policies and interviews might be more challenging than expected.

Let’s dig in. ⛏️

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One common argument from political commentators and amateur investors like myself is: "Trump was president a few years ago, so let’s look at what performed well during his previous term and replicate those trades. Easy, right?"

Not so fast.

There are a couple of issues with this train of thought.

The world is a different place compared to 2016 🌎

Trump’s playbook in 2017 focused on increasing tariffs on trade partners and reducing taxes—two promises he delivered on.

He initiated trade talks with China, but after failing to reach an agreement, he imposed tariffs on a wide range of products, including steel, aluminum, airplanes, soybeans, and solar panels. Predictably, China responded with its own tariffs on US imports.

Ultimately, after an 18-month trade war, a Phase I deal was reached with China.

Trump also lowered corporate taxes from 35% to 21% through the Tax Cuts and Jobs Act.

However, there are concerns that this playbook may not be applicable this time. The combination of tariffs and tax cuts contributed to higher inflation, which was manageable in 2017 due to the low inflationary environment.

Today, the situation is different.

With multiple rate hikes behind us and the Fed expected to cut rates, Trump may face limitations in implementing similar aggressive policies. The US budget deficit is also significantly larger than it was in 2017.

Timing is also crucial.

What worked in the run-up to the election and immediately afterward, did not necessarily sustain throughout the presidency. This is an important consideration for anyone focusing on the optimal trades.

There’s a new VP in town 🕶️

Trump’s pick for vice president came as a shock to many.

J.D. Vance, a prominent figure in the “Never Trump” movement during the 2016 presidential election, has been a vocal critic of former President Donald Trump.

A Yale law school graduate, Vance is more widely known for his best-selling memoir, Hillbilly Elegy. He transitioned into venture capital, first working at Mithril Capital Management, founded by Peter Thiel, and later at Revolution, an investment firm established by AOL co-founder Steve Case. Vance’s Silicon Valley past, might explain the recent support received from Elon Musk, Marc Andreessen and the Winklevoss twins.

If elected vice president, Vance would become the youngest person to hold the office since the Civil War. This choice could be a strategic move by Trump to appeal to younger voters and position Vance as a potential successor.

In 2022, he made headlines for his indifferent stance on Ukraine aid, declaring, "I don't really care what happens to Ukraine one way or the other." This position represents a notable shift in Trump's approach. Unlike Trump’s previous running mate Mike Pence, who was seen as a moderating force, Vance’s potential selection signals a move towards more hard-right “Make America Great Again” politics, breaking away from the traditional Republican establishment.

Policies 📃

Foreign

This is probably the least unpredictable factor among the potential scenarios. A second Trump administration would likely usher in a more protectionist environment.

Trump has been inconsistent regarding tariffs; Bloomberg reported a 50% flat tariff on all Chinese imports, while Trump mentioned in a Fox interview that it could exceed 60%. Additionally, he has proposed a further 10% tariff on EU products, signaling a tougher stance than his first term.

Beyond trade, both Trump and his potential VP plan to reassess the US's role in the Russia-Ukraine war. Driven by increasing war fatigue and a growing deficit, the aim may be to reduce financial support to Kyiv, which could ironically prove more beneficial than NATO’s ongoing arms supply.

Economic

Internally, Trump is expected to extend the JOBS Act, which is set to expire next year, if re-elected. He also aims to cut the corporate tax rate to 15%, although passing this might be challenging.

J.D. Vance has commented on the potential devaluation of the US dollar, noting that while "devaluation" sounds alarming, it would make American exports cheaper, which is crucial for boosting manufacturing jobs.

One way to devalue the dollar is by reducing interest rates, but this requires the Fed’s involvement—a body the President does not directly control. Trump may seek a more influential role or even consider replacing Jerome Powell, as he has already stated he would not re-appoint Powell when his term ends in 2026.

Potential Beneficiaries 🤑

Gold

According to a recent Bloomberg survey, gold is the best portfolio hedge in the event of a Trump re-election. Over 60% of the 480 respondents believe the US dollar will weaken in a second Trump term, making gold a more attractive safe haven.

During Trump's first term, gold surged over 50% while the dollar fell more than 10%. His proposed tax cuts, tariffs, and deregulation are seen as inflationary, which could further boost gold. Additionally, central banks have been increasing their gold holdings since 2022, anticipating a weaker dollar and seeking to diversify their reserves.

Crypto

Trump has positioned himself as a crypto-friendly candidate to attract undecided voters, in contrast to Biden’s skeptical stance on digital assets.

Bitcoin saw significant gains after the presidential debate, the assassination attempt, and Trump’s speech at the Bitcoin conference in Nashville. Trump has declared that he will push for a national Bitcoin reserve if elected, nudging the CMC Index into ‘Greed’ territory.

Palantir

This is a simple bet (although not necessarily effective).

Peter Thiel was an early and prominent supporter of Donald Trump's 2016 presidential campaign. J.D. Vance has close ties with Thiel, having worked together at Mithril Capital. By supporting Trump and Vance, Thiel has positioned himself as a significant player within the GOP, leveraging his influence to shape political discourse within the party— an influence that might also benefit his data analytics company, Palantir, which relies on government contracts.

Financials

Deregulation in the financial sector could lower compliance costs and boost profitability for financial institutions. Experts suggest that regulatory approvals for M&A might become more lenient under a Republican government, following a stricter antitrust approach under Biden, further enhancing equity sentiment. The Financial Select Sector SPDR® Fund, XLF, is one way to play this.

Oil Stocks

Policies focused on deregulation and encouraging domestic fossil fuel production are a bullish signal for oil stocks. The Trump platform explicitly supports oil companies and fossil-fuel automakers. SPDR® S&P® Oil & Gas Exploration & Production ETF, XOP, allows a more targeted exposure to the sector.

Small Caps

Small caps are companies with market caps of up to around $2b (although definitions may vary). Such companies that to be seen favorably as they usually support domestic manufacturing, which is less impacted by Trump’s tariff policy. The small-cap benchmark, the Russell 2000 Index, is already up nearly 10% over the last month.

On the Fence

Tesla

On the surface, Elon Musk’s endorsement of Trump might be akin to Peter Thiel’s. The billionaire has openly offered support in promoting Trump’s campaign.

Yet, EVs are not high on Trump’s priorities. Trump’s openness to Chinese automakers moving production to the US, could even pose more competition to the automaker. Musk’s comments might also disillusion Tesla’s customers, as noted by recent consumer search data.

Truth Social

Although it is one of the more direct trades, since Trump is the company’s majority shareholder, this is a highly speculative and volatile trade.

Not for the faint-hearted.

Dig Deeper ⛏️

• 2024 US Election - Pictet

• The Trump Trade Is Back. But Did It Ever Work?

• Brace Yourself: How the 2024 US Presidential Election could affect Europe

Headhunted 🦅

Recently funded private companies need talent! Scout jobs at recently funded European startups, ahead of your competition. 💪

1. Bunch 🇩🇪 - The private market infrastructure startup announced that they raised a $15.5m Series A. Recruiting across engineering, operations, and sales amongst others (link)

2. Greenely 🇸🇪 - The Swedish smart energy app has secured an €8m Series A round. Now hiring a CFO and backend developer (link)

3. Payt 🇳🇱 - Dutch payment software has raised €55m to scale European operations. Hiring a business developer in Germany (link)

4. DeepC 🇩🇪 - The radiology AI developer has closed a $13 million Series A extension round. Now hiring a chief revenue officer (link)

5. Lakera 🇨🇭 - The US-based company has raised $20M Series A to secure GenAI applications. Hiring a senior ML Engineer in 🇨🇭 (link)

Interestingness📔 

• This month’s book pick is Ultra-Processed People, which talks about the history and impact of ever-increasing food processing. Packed with extensive interviews and easy-to-understand science concepts, the book is truly eye-opening (link)

• Australia’s sovereign wealth fund, Future Fund, has focused on hedge fund exposure instead of traditional government bonds to diversify equity risk (link)

• US PE Funds are taking longer and longer to close - the typical private equity fund now takes 1.5 years to close (link)

• Seed valuations are now double what they were six years ago (link)

📚 New to investing? Grab a PDF copy of my ebook here.

As always, the financial disclaimer!

This is not investment advice. I am not a financial advisor. Make sure to conduct your thorough research before purchasing or selling financial products.

PS. I already own GLD and BTC in my portfolio.