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We the People of the United States…
“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution of the United States of America.” - Preamble to the United States Constitution
After months of political rhetoric, back and forth accusations and approximately $16b spent on advertising, the results are finally in, and investors can now refocus on policies and the direction of growth for our country. These words should remind us what OUR great country was built on and that we will always find a way to not only succeed, but thrive.
Elections.
With the potential for a Republican sweep, the US Dollar has jumped to a new three-month high, interest rates are up, the price of oil is down and bitcoin surged to a new all-time high of over $75k. Historically, the market has rallied between Election Day and year-end on average...
Below is what RBC Capital Markets believes is the impact of a Republican sweep and if Congress is split:
Interest Rates.
The 10-year Treasury hit a recent low in mid-September of 3.60%. It is currently (as of 11am on November 6) at 4.45%. This rise in yields over the last several weeks was due to the gains President Trump was making in the polls since his policy was thought to add potentially $3T more than Vice President Harris’s to the deficit over the next 4 years. His win punctuated that with the 15bp point we are seeing today. We believe this is potentially another opportunity to again lock in higher rates, as eventually rates will fall as the economy will struggle to sustain growth with rates this high.
Growth.
Previously, we have written about growth areas in the market. Artificial Intelligence (AI) is now a consensus long and while some are arguing that valuations are potentially stretched with real-use cases still somewhat limited, ancillary opportunities still exist. With companies like Microsoft, Amazon, Alphabet and Meta discussing the use of nuclear energy to power AI datacenters, that opportunity is still a decade out and will only be able to satisfy a small percentage of the demand. In the meanwhile, electricity and utilities continue to be a solid opportunity to benefit from this trend.
Anecdotes.
- Novo Nordisk stock rose after Wegovy sales beat expectations last quarter, a potential relief for investors after Lilly’s disappointing obesity drug sales last week. – Bloomberg
- Chinese Premier Li Qiang expressed confidence that his government can pull off an economic recovery. “The Chinese government has the ability to drive sustained economic improvement,” Li said in a speech Tuesday at the opening of the China International Import Expo in Shanghai. He added that officials had “ample space for fiscal policy and monetary policy,” and reiterated that China would hit its economic growth target of around 5%. – Bloomberg
- OPEC+ agreed to delay a production hike by one month, from December until January (it was expected that the December restart would be postponed, but a 30-day delay probably won’t provide a major boost to oil prices). – Bloomberg
- Australia’s CPI cooled in Q3 and September (the September CPI tumbled to +2.1%, down from +2.7% in August and below the consensus forecast of +2.3%), although it’s likely the RBA will hold off on immediately cutting rates. – Wall Street Journal
The S&P 500 is at all-time highs. With the elections now behind us, it will be important now to focus on the policies and what the impact of these policies will be to the various investment classes. Historically, corporate fundamentals and economic growth have been the driver for strength in the stock market. Continuing to focus on growth opportunities and being able to quickly adapt to changing situations will hopefully allow us to continue to help our clients achieve their investment goals.
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The information contained herein reflects the opinion and projections of Bergamot Asset Management LP (“Bergamot”) as of the date of publication, which are subject to change without notice at any time subsequent to the date of issue. Bergamot does not represent that any opinion or projection will be realized. All information provided is for informational purposes only and should not be deemed as investment advice or a recommendation to purchase or sell any specific security. This shall not constitute an offer to sell or the solicitation of an offer to buy any interest in any fund managed by Bergamot or any of its affiliates. While the information presented herein is believed to be reliable, no representation or warranty is made concerning the accuracy of any data presented. This communication is confidential and may not be reproduced without prior written permission from Bergamot. Market conditions can vary widely over time and can result in a loss of portfolio value. Past performance does not guarantee future results.
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