The Spell of Donald
A gedanken on market efficiency and themes in play. Deregulation and Tariffs. Fading the narrative.
“Countries are going to pay us back for all that we’ve done for the world.” —DJT
We are seeing blowouts in Crypto and Small Caps as a direct result of the Trump election. The hype is once again real in Cryptoland, and the S&P 600 is back to over-performing the larger caps.
The rhetoric from the incoming Trump administration is super-bullish and markets are reacting accordingly.
Let’s breakdown all the themes into buckets to see how they have reacted and to gauge whether the post-Trump financial market puzzle makes any sense — and if we can see what the complete image would look like.
Let’s start with Crypto…
Trump is pro-Crypto and markets reacted accordingly. On that note, Breakout by Philo served well its purpose of forcing us to follow markets with a bias on technicals, rather than letting our own bias infect our thinking.
Check out this technical commentary on BTC and ETH in Issue #7 here, to see what I mean.
BTC is up 33% for the month. ETH is up 32%, but down 30% from its peak of 2021.
Why is that?
Because of the different roles they play in the Crypto sphere. BTC is seen as a reserve asset, a replacement and substitute to the Dollar as well as a hedge against inflation.
This is why the digital asset performed well even before Trump was elected — as sticky inflation and low real interest rates kept worries on inflation on the up and up.
ETH on the other hand is more a play on broader Crypto adoption and Crypto applications (Remember NFTs and De-Fi?).
A long-term Philoinvestor follower reminded me of my piece in late-2021 which effectively called the peak in the Crypto run of 2021. For good historical context on the space, read this.
While Crypto adoption has definitely not been as expected, there are other angles to the space which keep it very much alive.
For starters, let’s look into the idea of a Bitcoin National Reserve before we move to tariffs, trade wars, the Dollar and Small Caps etc.