This week turned out to be exceptionally rewarding for gamblers and traders who bet on Donald Trump. In line with bookmakers’ odds and predictive markets – the probability of a Trump victory on Polymarket was 65% as mentioned in last week’s News Flash. Contrary to polls showing a close race for the presidency, Trump comfortably beat Kamala Harris with the current count of 295 versus 226 electoral votes.
The result is that Trump trades have been paid off handsomely. The S&P 500 and Nasdaq soared to record highs after the results came in, with markets expressing relief at a swift, decisive, and uncontested victory.
Stocks that fared particularly well-included oil and banking companies that are expected to benefit from looser regulation. The Dow Jones logged its best day in two years, surpassing that of the S&P 500 with signs of a broader rally beyond Big Tech, although those stocks also gained strongly. The FTSE 100 and Eurostoxx 600 were only slightly up, while stocks in China and Hong Kong had their best week since the stimulus of early October on the back of the announcement of a further stimulus package.
“Markets are reflecting the belief that animal spirits will be released by the Trump presidency,” said Chris Grisanti, chief market strategist at MAI Capital Management. Trump Media, the owner of the Truth social media platform associated with Trump, spiked 35% on Wednesday before surrendering most of its gains by the end of the week. Tesla stock was a major winner, no doubt thanks to Elon Musk’s close association with the Trump campaign. It has climbed around 19.25% for the week to date. Companies that manage private prisons and detention centres also soared on Wednesday on the expectation that Trump will detain more migrants that enter the country illegally. Shares of two private prison operators, GEO group and CoreCivic, jumped by 42% and 29%, respectively.
Other Trump trades that paid off included Bitcoin, which surged to a new record high above $75,000, and the US dollar, which gained against most other currencies, including the euro, the British pound, and emerging market currencies like the Mexican peso and the Chinese yuan.
The most notable loser of the week was the $28 trillion market for US government debt, with 10-year Treasury yields spiking toward 4.5% before moderating somewhat. This is a signal that investors anticipate a swelling deficit and rising inflation under Trump, which may reduce the scope for further interest rate cuts or even prompt the Fed to hike rates.
According to a note from our research partner, Analytics Consulting, the rationale for the current US equity market reaction stems from Trump’s stated intentions: To impose significant import duties on Chinese goods; extend the US personal income tax breaks that are scheduled to expire in 2025; to boost US economic growth, especially industrial activity; and to be less supportive of global initiatives that do not directly benefit the US.
Over the medium term, however, the outlook for the US and global economy is a lot more uncertain. This uncertainty may ultimately unsettle financial markets, especially if Trump’s policies start to negatively impact the US economy. This becomes more likely if:
- The extent of Trump’s victory emboldens him to implement much more radical economic policies
- The Republican party has complete control over Congress, which might encourage them to override growing concerns about the size of US government debt
- Trump’s unpredictability introduces a higher level of uncertainty that could undermine stability
- China’s response to Trump’s policies could escalate a more pronounced trade war between the two biggest economies in the world
- Trump’s victory strengthens the role BRICs and a desire to move away from the US dollar as the reserve currency
- An increase in geopolitical tensions if the US steps away from its historical role in global conflicts
- The US experiences a resurgence in inflation as a result of higher import duties that require a change in monetary policy.”
Our hope now is that, beyond the MAGA hype, investors can return to focus on positive underlying fundamentals, the general resilience of the US economy, and the tailwinds of lower interest rates globally.
“Stocks have the wind at their back for now, but equities will be keeping a close eye on yields. And if the Treasury slump continues, that will short circuit the Trump equity celebration.”
– Adam Crisafulli, founder of market intelligence firm Vital Knowledge
Global News
- Trump was elected the 47th President of the United States, pulling off a political comeback in one of the most polarised contests for the White House in US history. Trump, 78, won an unprecedented race during which he was convicted of felonies, survived two assassination attempts, and crushed a challenge from Vice President Harris after she replaced an unpopular President Joe Biden in the campaign’s final months. At the same time, Republicans won control of the US Senate, and the House of Representatives remains to be decided, which could lead to him being relatively unconstrained in his ambitions.
- US stocks rocketed higher on Wednesday following Trump’s decisive victory. The massive rally kicked off in premarket trading and continued through the morning and afternoon trading sessions. The Dow soared by 1,507 points, or 3.57%, to close at a new record high. It’s the first time the blue-chip index has gained more than 1,000 points in a single day since November 2022. The S&P 500 and Nasdaq also reached new highs, with the S&P surging by 2.5% and the tech-heavy index closing 2.95% higher. The US dollar had its best day in years, but Treasury yields also rose, while Bitcoin hit a new record high level.
- The ten richest people in the world became even richer as their wealth surged by a daily record, the biggest daily increase since Bloomberg’s wealth index began in 2012, on Wednesday. The net worth of billionaires led by Tesla CEO Elon Musk, the world’s wealthiest person, surged by $63.5 billion on Wednesday, according to the Bloomberg Billionaires Index. Musk alone added $26.5 billion to his pot. Amazon’s Jeff Bezos and Oracle’s Larry Ellison were also among the top gainers.
- The Fed’s independence could be compromised once Trump returns to the White House. It’s unclear if he, or any president, could take the Fed’s independence away on his own or if it would require congressional approval. In August, Trump indicated that he strongly felt that the president should have a say in the Fed’s decisions. Yet, Fed chairman Jerome Powell was firm in stating that he’s ready to defend the US central bank from political pressure following Trump’s re-election, saying he wouldn’t resign if asked and insisting the incoming president doesn’t have the power to fire him or other senior Fed leaders.
- Fed officials voted unanimously yesterday to lower the benchmark rate by 25 basis points to target range of 4.5%-4.75% It noted that the “labour market conditions have generally eased,” and repeated that “the unemployment rate has moved up but remains low”.
- The Bank of England voted eight to one to cut interest rates 0.25bps to 4.75% yesterday. This comes three months after the bank reduced interest rates for the first time since March 2020, cutting them to 5%. The Monetary Policy Committee said: “There has been continued progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly.” Inflation has eased, dropping to 1.7% in September, down from 2.2% the previous month.
- Chinese lawmakers are set to approve a massive fiscal package, worth trillions of yuan, aimed at supporting economic growth. The Standing Committee of the National People’s Congress will oversee this effort, the largest since the pandemic, which includes funding to relieve local government debt and recapitalise major state-owned banks, according to Goldman Sachs and HSBC. However, the package may not fully reassure markets.
- Nvidia became the largest company in the world on Tuesday, surpassing Apple and underscoring just how dominant artificial intelligence has become on Wall Street. Its stock gained 2.9% to $139.93, resulting in a market capitalisation of $3.43 trillion, ahead of Apple at $3.38 trillion. In addition, Nvidia will join the Dow Jones Industrial Average, replacing Intel Corp. This change, effective before trading begins today, was announced by S&P Dow Jones Indices.
- Berkshire Hathaway’s cash pile reached $325.2 billion in the third quarter, a record for the conglomerate, as Warren Buffett continued to refrain from major acquisitions while trimming some of his most significant equity stakes. It again cut its holdings in Apple, making its stake now worth $69.9 billion at the end of the quarter, down from $84.2 billion in the second quarter, indicating that Berkshire cut its stake by about 25%. Berkshire Hathaway had gained 29% year-to-date as at Thursday’s close, versus the S&P 500 at 26.7%.
- Novo Nordisk posted surging sales of its blockbuster weight-loss treatment Wegovy on Wednesday, with revenue gaining 79% and sales in the US surging 50% even as prices fell after more insurers agreed to pay for the drug. This has reassured investors after rival Eli Lilly & Company reported disappointing sales of its obesity treatment last week. Novo stock climbed as much as 8.9% in Copenhagen, on the announcement of their new enhanced dual-action weight-loss drug, before paring those gains on concern over the pace of sales growth next year. (Novo Nordisk is a holding in the Fundsmith Equity Fund.
- As at Thursday’s close the S&P was up 4.3% for the week.
Local News
- Trump’s stance on immigration and trade tariffs could be inflationary, resulting in higher-than-expected global interest rates and a stronger dollar, hurting the rand. A possible trade war between the US and China could dampen demand for commodity exports, further undermining the rand according to a portfolio manager at Ninety One.
- DA leader John Steenhuisen, in an interview with BusinessLIVE, said that the government of national unity (GNU) cannot solve all of South Africa’s problems and clarified that DA’s coalition with the ANC applies only nationally, not provincially. The 2026 local elections in Gauteng will be crucial, with the ANC and DA each positioned to benefit if the GNU succeeds.
- President Cyril Ramaphosa has appointed judges to a special tribunal, which has a statutory mandate to recover public funds siphoned from the fiscus through corruption, fraud, and illicit money flows. Judge Margaret Victor was appointed tribunal president for a three-year term, with other judges being recruited from around the country. The special tribunal’s proceedings are inquisitorial and characterised by extensive pretrial investigations.
- Fitch Ratings signalled that it may upgrade South Africa’s credit outlook if government sticks to its path to stabilise debt as outlined in its three-year budget plan. Yet, it cautioned that the budget forecasts are optimistic. Fitch expects the debt-to-GDP ratio to rise in the next few years, reaching 76.9% in the 12 months through March 2027, while National Treasury sees it at 5.5% of gross domestic product in the year to March 2026.
- Goldman Sachs believes South Africa is unlikely to suffer the large revenue shortfall projected by its finance minister and that the nation’s path for fiscal consolidation remains credible. South Africa remains on track to stabilise debt and bring it below 70% of GDP by the end of the decade, Goldman economist, Andrew Matheny, said on Monday. He added that government was being overly conservative regarding the magnitude of the expected revenue shortfall, which the National Treasury has pegged at R23 billion.
- Eskom announced on Thursday night that it has started the process to cut power supply to Johannesburg’s City Power due to unpaid bills of R6.3 billion, R4.9 billion of which is arrears debt. It is not clear when Eskom plans to implement the supply interruptions or what form it will take. Some parts of Joburg that are supplied by Eskom directly will be excluded from the action.
- The Department of Water and Sanitation has distanced itself from the water infrastructure issues plaguing the Gauteng economic hub, especially troubled Johannesburg. The department has made it clear that it cannot be held responsible for resolving issues that are constitutionally the responsibility of municipalities,
- Beauty and pharmacy giants Clicks and Dis-Chem are leading a recovery in the retail sector when measured by share price as the top six companies compete fiercely for customer loyalty in a tough economy. Dis-Chem heads the pack with a gain of 22% so far this year, while Clicks is up 18%. The gains are attributable to their expansion and loyalty reward programme strategies, as well as an improved outlook on inflation and interest rates.
- Retail group Truworths International reported a 2.8% increase in sales for the first 18 weeks of its financial year but notes that trading conditions locally remain challenging. Online sales showed good growth in the current period, increasing by 38% and contributing 6.4% to the segment’s total retail sales, it said. General trading conditions in the UK remain suppressed as consumers maintain a cautious approach to spending.
- South Africa’s second-largest grocery store, Pick n Pay is gearing up to open more new outlets across the nation from 2026. Next year, it will inject capital into opening new retail locations beginning in mid-2025, targeting a total of 100 new stores within the next three years. It will also revamp some of its older shops.
- As at the time of writing, the rand was 0.65% stronger against the dollar and the ALSI was 1.1% down for the week.
Sources: Dynasty, Business Report, BusinessLIVE, News24, Bloomberg, CNN, Washington Post, New York Times, Reuters, Mail & Guardian, The Conversation, etc.
