Financial market commentary can become a tedious affair. Hundreds of analysts all trying to get the attention of decision makers with an endless stream of emails, TV and radio spots, blog posts etc…. all saying boringly similar things. Interest rates up or down, leading to equities doing something, therefore…. yawn blah blah blah zzzzzzz. Not anymore!!
So, the U.S election has come and gone and surprise surprise, the White House will turn gold in January. A distinct swing to the right in US politics – away from the socialist agenda of the Democrats. My view is that the Republicans did not win this election. The Democrats lost it.
Joe Public has become tired of the extreme wokeness of the Democratic agenda.
This has created some turmoil in financial markets causing the USD to storm ahead, Bitcoin to go stratospheric, US equities to act like a break dancer on uppers. Bond yields to break the ceiling, and Emerging Market currencies to sink as if they were facing a Springbok scrum.
This is before Trump has even placed his gold loafers under the Oval Office desk.
But perhaps even more important is the real deputy in town. I’m not talking about JD Vance, he may be Vice President, but the real man is none other than the newly appointed “Doge” Czar – Elon Musk, who has been tasked with dismantling inefficiencies in the Federal Government.
You would have heard me speaking about the US’s massive debt burden of close to 36 trillion USD before, and this is where Musk needs to make his mark.
Before we get into the specifics, here’s a little example of what Musk can potentially achieve.
A few years ago, Musk paid an exorbitant amount of 44 billion USD for what was formally known as Twitter. Analysts were astounded at the fee that he was prepared to fork out (me included) for what was ostensibly a social media platform where people shared, amongst other things, what they were having for dinner.
Immediately Musk fired 80% of Twitters staff, leading to a social backlash that led to advertisers pulling their product off the platform. Many predicted Twitter's imminent demise and a loss of 44 billion USD.
Today “X” is more efficient, has many more users and has become the world's media platform, taking on the established mainstream media portals of CNN, CNBC and others.
It’s no longer a social media platform but arguably a social journalism portal.
Please do not mistake this commentary as me becoming a Trump/Musk fan. However, the realities of the political swing are important to take into account.
The global political and economic system is fundamentally going to undergo a step change, and the future will be very different to what it is today.
MAGA – focus on the US and forget about the rest. This is where Trump has captured the voting public.
The first thing I would be doing if I was a federal employee is updating my CV. Musk is going to come in guns blazing. Some may recall the scene from “Entourage” where Ari Gold, having purchased his archrivals agency, enters the premises with a paint gun, blasting everyone that he is going to fire.
This is Musk – but with a Gatling gun taking aim at loafers and cruisers. Fire a plethora of ineffective individuals and replace them with compliant non-unionized AI programs. One of the other things that Trump wants to do is tax university endowment payments, especially to those left leaning campuses, and use the money to create a free online university for American students. Whether he gets this right or not and given his “Trump University” failure.
He also wants to abolish the education department – I’m not sure how this works.
However, it is demonstrative of the type of thinking permeating the political discourse.
For sure there will be a few enormous battles.
Already J Powell and the future President are sparring around the independence of the FED, perhaps even the relevance.
There is also the small issue of a decrease in Government spending leading to a decrease in GDP growth.
For global politics the Trump administration has meaningful impact. From the Middle East to Russia/Ukraine, to China/Taiwan, Nato to Brics. Everything is potentially going to change.
For tiny South Africa the implications are also serious. AGOA will become important from an economic perspective. SA’s stance on Israel and Russia will also bear scrutiny.
Everything is going to change.
- Tariffs
- inflation
- digital currencies.
No longer will economic commentary be boring. Not to be too dramatic but the next 4 years are going to be interesting and uber fluid. We had better all pay attention.
The only thing not changing is Liverpool’s status – YNWA.