Chief Investment Strategist, The Freeport Society
We were wrong.
After yesterday’s election, we expected a bitter post-election battle in the courts as both candidates contested the results.
But the whole thing went smoothly.
And Donald Trump will be returning to the White House without a hitch.
That’s okay. I’ve been positioning you to do well in one outcome and do better in the other.
Heads, we win. Tails, we win more.
Still, the last few weeks my focus has been on preparing for extreme volatility. That’s no longer on the table, so we shift gears.
And for folks who recently joined our Freeport Alpha service, I’ll have more for you on our trading strategy later today.
I’ve also recorded a short video about what’s to come, which you can find at the bottom of this issue.
Today, let’s turn to what a Trump presidency means for us as investors.
We’ve seen this movie before.
There will be some good policies.
There will be some bad policies.
More than anything, there will be a lot of noise.
Our goal is to cut through the noise and focus on the real underlying trends.
What changes?
What doesn’t?
And how does this affect our wealth?
Let’s start with what changes.
Good News for Taxes, Crypto, and Tech
Trump’s win means there’s a better chance his 2017 tax cuts get renewed.
It’s still subject to negotiation with Congress. That may not be a sure thing given the tight margins. Republicans have reclaimed the Senate. But the House remains up for grabs (at this writing).
But the odds are good that tax rates stay around current levels.
If Trump can deliver on his campaign promises, they may even go lower.
We’re also likely to see a more relaxed attitude to regulation – particularly around technology.
As I wrote about yesterday, the artificial intelligence (AI) revolution was happening with or without Trump. Now, we’re taking off the training wheels.
It’s going to be wild.
It’s going to be chaotic.
It’s going to create fantastic opportunities for us.
The more relaxed approach to regulation is also a major boost to Bitcoin and other cryptocurrencies.
Bitcoin hit a record high of $75,000 as election night rolled on.
President Biden’s SEC was downright hostile to crypto.
Trump promises to leave the industry in peace.
We’ve held Bitcoin in the model portfolio at our Freeport Investor advisory since we launched the service in December 2023.
Subscribers who acted on that recommendation are up close to 80%.
And I’m now more bullish than ever on the crypto.
Finally, we’re going to see a lot less environmental, social, and governance (ESG) twaddle.
At The Freeport Society, we put profit ahead of politics.
That’s why, since we launched, we’ve looked for opportunities in oil and gas stocks that the ESG mafia pushed out of favor.
A good stock is a good stock regardless of who’s in the White House. But this is clearly a better outcome for energy stocks.
It’s not all cupcakes and roses though…
The Inflation Crisis Isn’t Over
Exit polls showed that the lingering effects of inflation were a major driver in Trump’s win.
I get it.
Biden and Harris were tone deaf about the cost-of-living crisis. But the factors driving inflation are still in place and may get worse during Trump’s new term.
There are four main drivers of inflation:
- A chronic labor shortage brought on by the aging of the Baby Boomers.
- The collapse of globalization.
- Massive budget deficits.
- And a clueless Federal Reserve.
Trump can’t make the Baby Boomers 10 years younger.
There’s no magic solution to the labor shortage. Automation will eventually help. But it will take time.
Globalization was already fraying before Trump’s first term. The decoupling from China accelerated under Trump. It didn’t reverse under Biden. If anything, Biden out trumped Trump on China. Now, we’re looking at higher tariffs that will accelerate this trend even more.
And the budget deficit?
Trump’s tax cuts will leave more money in Americans’ pockets. But they’ll also add trillions of dollars to the national debt. You can’t cut taxes without also cutting spending. And no president of our lifetimes has managed to do that.
And what about the Fed?
I don’t see a reality in which the Fed somehow gets more competent because the occupant of the White House changed. The Fed is structurally flawed. The presidential election doesn’t fix that.
So, expect inflation to stick around for a while… and hedge accordingly.
We’ve had gold – the classic inflation hedge – in the model portfolio at The Freeport Investor since we launched. We’re up about 35%.
Unless the forces driving inflation somehow go away, expect more gains to come.
Lingering Questions
The election may be over, but there’s still a lot yet to be decided.
What will Trump’s cabinet look like?
Will Elon Musk have a role? What would that look like?
There’s still more than two months until the inauguration… and the world doesn’t stop spinning.
The Fed starts its two-day meeting today to decide on rate cuts. We’ll know tomorrow what they do on rates.
So, the end of the election doesn’t mean the end of the Age of Chaos.
As globalization continues to unwind, as wars continue to rage overseas, and as the national debt continues to climb, that trend remains intact.
More than that, it’s still in its early innings.
For now, let’s at least celebrate that the election went off without a hitch and that Americans have once again chosen a new president.
And let’s get down to the business of making money.
To life, liberty and the pursuit of wealth.
P.S. As I mentioned up top, I recorded a short video regarding Trump’s victory. Watch it now.
If you’d prefer to read the transcript, you’ll find that below.
Transcript
Well, the election’s over, the votes have been counted, and it looks like Mr. Donald Trump is going to be returning to the White House.
So what does that mean?
What are the risks?
What are the opportunities for us?
Well, let’s start with the risks first.
Trump, he likes to stir up the hornet’s nest. That’s really been his method from the beginning. He likes to shake things up, he likes to generate controversy. It comes from his history as a media personality, as a reality TV show host. He likes to really get your attention and shake things up.
We should prepare for a little bit of chaos, for sure. His first term was definitely chaotic. There were some good policies, there were some bad policies. But through it all, there was just a lot of noise. So, we should prepare for that.
In terms of what specific policies, what particular risks and opportunities we should look for… One is, we should be on the lookout for a resurgence of inflation.
One of the themes that has been a real consistent go to for Trump is tariffs and globalization decoupling. Build things in America, make things in America. All that’s good and all that does create opportunities of reshoring. The rebuilding of America’s industrial base is an investment theme with a really long runway in front of us.
But in the short term, it does create the risk of continued inflation, shortages. A lot of the things that were really annoying about the pandemic time period, we may see a return of some of that.
I do believe that traditional dollar hedges, traditional inflation hedges, like gold, make a lot of sense. That’s something we really believe in in The Freeport Society. And I think now even more than usual, we should have that kind of protection.
In terms of opportunities, Donald Trump is easily the most pro crypto president we’ve ever had. He’s called himself as much and he actually does back that up. So, I think you are going to see a lot of innovation in that space, and you’re going to see the government mostly get out of the way.
One of the biggest impediments to Bitcoin and other cryptocurrencies really getting broader acceptance in the financial system is you’ve had the SEC putting pressure on them. I would expect that pressure to be lifted, and I would expect to see crypto do really well in the years ahead. I expect to see a lot of new innovation there.
Beyond that, the exponential progress of technology is one of our core themes in The Freeport Society. I think you are going to see a lot of new investment in AI. You’re going to see a lot more unfettered investment. You’re going to see more of a hands-off approach from the government, which is good. It should accelerate that progress there.
And then finally, I mentioned this before, but I’ll reiterate it now. The deglobalization theme, the decoupling of the U.S. from China, and just the general breakdown of global free trade. That trend has really been in place for about ten years, but it really accelerated under the first Trump administration and then continued throughout the Biden administration.
I think we’re about to see it accelerate again. That does create some short-term risk, but it also creates some really nice long-term opportunities in the companies building out America’s industrial base.
So, get ready. It’s going to be an interesting four years.