MarketCycle Wealth Management
170,000,000 U.S. citizens did not vote in the recent election; that is 50% of the country. Roughly 25% voted for Harris and 25% voted for Trump. I was concerned about the conclusion of the U.S. election possibly being dragged out. 200 lawsuits were filed even before Election Day, but the election did not drag out. Several ballot boxes were fire-bombed and bomb threats were called in around the country, but it could have been worse. Hedge Funds were very heavily hedged and in protection mode. When the winner was same-day announced, the market instantly calmed down and jumped up to new record highs. The market truly hates only one thing and that is “uncertainty.” And so it goes.
Starting in January, President Trump is going to do a lot of things very quickly, perhaps signing 100 Executive Orders during his first week in office and immediately starting to implement his promised government, retirement, judicial, environmental, educational and social altering changes. President Trump repeatedly told us what he will do and there has even been a 900-page book written about it that shows the “4-Pillars” and the “10-Key-Proposals.” Again, the only thing that the market cares about is “uncertainty” and all of this has literally been put into print. And if what I am saying sounds biased, please trust me, I am taking a neutral stance and looking at everything from a central point… I am attempting to see only facts.
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Trump’s financial/business actions and results:
- Lower corporate taxes plus drastically reduced oversight and regulation (rules) will allow corporations to generate very high profits and this will drive the stock market higher and higher for the next 4 years. Further impetus created by AI and robotics will offer additional corporate profits via productivity increases (think “Elon Musk”).
- Trade tariffs (as high as 60% on China and 25% on Mexico) will be paid by the American consumer, not by the country that has the tariff imposed on it, and this will eventually cause high inflation in the U.S. (and there is not enough time to move production to the United States).
- Deportation of 11-million workers will also cause eventual inflation in the United States. The taxpayer cost alone will be $88-billion per year and it is estimated to take 10 years. And your groceries, for instance, may double or triple in price. That garage that you want to build may easily cost $200,000 rather than the current $100,000.
- A parabolic stock market plus corporate deregulation comingled with eventual high inflation levels (inflation arrives closer to the end of this current bull market) will combine to cause the economy to eventually crash and burn, but as I stated, this crash and burn is likely to be 4-5 years away. Every major stock market crash in history has been caused by this three-prong combination. (Both inflation and crashes can be exploitable & rapidly profitable and I am willing to help anyone through this coming abyss.) I reserve the right to be wrong, but I am fairly certain about what I’m saying.
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One financial asset that may be about to go to the moon over the next two years (because of item #1 above) is small-cap stocks.
Back in 2022, I wrote that gold had completed what is called a “cup-and-handle” chart formation. Most readers yawned. This is an extremely bullish chart pattern, mostly because, when technical traders see it, they get very bullish and they start buying and then keep buying. MarketCycle has a large gold bullion position, held in the vaults of the Canadian Mint. Gold has moved up $1000 per ounce since I posted that “cup-and-handle” article just two years ago!
During the first week of November, post-election, small-cap stocks finally completed their own “cup-and-handle” chart pattern and immediately executed a one week leap higher. This means that millions of other traders have also now seen it. This particular chart pattern might send the Russell-2000 small-cap stock index (as shown below via the ETF of IWM) up towards (or past) 300 within a two year period. Unless something side-tracks it, this would be an extremely profitable move. Small-cap stocks are one area where “stock picking” or “ETF picking” is of critical importance… a correctly chosen small-cap ETF could run up much higher than does the general Russell-2000 small-cap stock index. (The following chart was originally created in November of 2023 and posted here on November 11, 2024, one year later… it was amazing how the stock market slowly followed and filled MarketCycle’s pre-drawn markings.)
IWM as representative of the Russell-2000 small-cap stock index:
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That’s it, we’re bullish on the stock market, and thanks for reading!
MarketCycle Wealth Management is in the business of navigating YOUR investment account through rough waters. The process is simple and we work hard to earn our keep.
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MARKET CYCLE — MOMENTUM — TREND FOLLOWING — RELATIVE STRENGTH — HEDGE FUNDS
