By Adam O'Dell,Banyan Hill Publishing, 2024-07-29
Almost overnight, Kamala Harris has emerged as a serious contender to win the presidency.
Riding a tidal wave of more than $200 million in donations and garnering universal support from the Democratic establishment, she's quickly catching up with TRUMP in the polls.
Eight days ago, it seemed like Biden was all but beaten. Now, we have a very real race on our hands.
But what would a Harris presidency really look like?
With just 98 days left before the general election, she doesn't exactly have time to reinvent the wheel.
So we can expect Harris‘ platform and policies to be a carbon copy of Biden‘s.
That means continued infrastructure spending, green energy subsidies and social programs. So the biggest winners would be stocks in the health care sector, green energy stocks and infrastructure plays.
(My colleague Charles Mizrahi spoke about these green energy plays in last Wednesday's Banyan Edge.)
Meanwhile, a second Trump term would deliver more deregulation, more tax cuts and an increased focus on energy. That's great news for cryptocurrencies, regional banks, private prisons and stocks in the oil and gas sector. Trump‘s protectionist policies could also strongly favor domestic industries at large.
But just like every election year, the most important consideration is not getting too carried away with anyone's promises or predictions…
Because the sun doesn't rise and set on who's living in the White House.
Innovators will continue innovating.
Americans will continue growing and thriving.
And unfortunately, our national debt will continue surging to new heights.
It's also important to remember that a leader's vision won't always come to pass during their time in office…
Kennedy famously promised to put a man on the Moon, but he didn't live to see it.
FDR guided America through the darkness of World War II but didn't make it through himself.
And Donald Trump made massive inroads with funding and programs for artificial intelligence (AI) — that are only now beginning to bear fruit.
So while it's crucial to honor and value our greatest leaders, we still owe it to our portfolio to account for the bigger picture…
2024's “Phantom” Paradigm Shift for Stocks
While all eyes are on the presidential election these next few months, the stock market is going to undergo a massive transformation.
Most investors will only recognize what's happening in hindsight … and they'll completely miss out.
But this paradigm shift will lead to a handful of fast-moving windfalls for those who are tuned in.
Because as you already know, inflation came out of nowhere in mid-2021. It quickly surged to its highest levels in over 40 years.
Now — after three tough years of rising prices — it seems inflation is disappearing just as quickly as it cropped up.
Investors weren't ready for inflation to surge so quickly back then … and they're certainly not ready for it to decline quickly now.
After two years of soaring profits for mega-cap “Magnificent Seven” stocks, the average investor simply isn't ready to pivot to the market's newest hotspot.
America's Small-Cap Renaissance
Small-cap stocks are currently closing out their second-longest stretch of underperformance since the Great Depression.
Between December 2016 and November 2023, small-caps returned just 46%, while the S&P 500 delivered 130%.
One of the primary reasons for this gap in performance is the fact that small businesses typically struggle in high-interest-rate environments. High borrowing costs limit the options for a small company with limited cash.
At the same time, mega-cap “Magnificent Seven” companies have billions on hand to fund their own Research & Development. And investors have rewarded them richly for that advantage.
But now the tables have turned.
With interest rates set to come down sooner than expected, investors are rapidly shifting capital over to small-cap stocks…
Since the market got wind of falling inflation on July 11, the largest 250 stocks in the S&P 500 are up just 1.6%, while the smaller half of the S&P 500 is up 4.5%.
Even more telling is the money that's rapidly flowed out of the so-called “Mag 7” stocks, which are all within the Top 10 largest stocks in the index. Since July 10, the Mag 7 have fallen an average of 11.6%, while the smallest 10 stocks in the index have averaged a gain of 7.1% over the same time.
We're witnessing a critical transition in the stock market here, and it's playing out in real-time.
