Home Forex Three key areas to watch ahead of the November 2024 election

Three key areas to watch ahead of the November 2024 election

by SuperiorInvest

Super Tuesday was, if I may say so, super obvious. Former President Donald Trump captured nearly all of the delegates up for grabs last week, forcing his Republican rival, Nikki Haley, out of the race, all but guaranteeing his nomination. Trump's poll numbers, aggregated by RealClearPolitics, also show him further ahead of President Joe Biden, whose favorability remains stagnant as the border crisis continues unabated.

A graph of a graph of a person. Automatically generated description with medium confidence.

There are eight months left until the general election, but I don't think it's too early for investors to prepare for a possible second Trump term. And let's be clear: Trump, if he wins, would be constitutionally limited to a single additional term, just like Biden. Since the current administration has rolled back a number of Trump-era policies, especially those related to immigration, Trump and lawmakers would have to work quickly to implement new laws and policies before those four years are up.

Below are three areas for investors to watch in the event of a Trump victory in November.

  1. Immigration and border security

Immigration is the top issue on most Americans' minds right now, according to a recent Gallup poll; It is also possibly the topic most associated with Trump.

Since Biden took office in 2021, record numbers of undocumented immigrants have arrived in the United States, alarming families and businesses alike and straining the infrastructure and resources of many communities. So far in fiscal year 2024, which began in October 2023, nearly 1 million migrant encounters have been recorded at the U.S.-Mexico border, surpassing the total number in most previous years. The United States now has a record number of foreign-born people living within its borders: 49.5 million, or 15% of the total population, the Census Bureau reported in October.

A multi-year chart.  Automatically generated description.

A multi-year chart. Automatically generated description.

If voters return Trump to the White House, I hope we see swift action on the immigration front. We will likely see the reimplementation of old Trump policies, including “Remain in Mexico,” and as recently as last month, the former president promised to implement “the largest deportation operation in U.S. history.” A majority of Americans, or 53%, now support building a wall along the U.S.-Mexico border, according to a Monmouth University poll conducted in February.

The bottom line is that people want to feel safe. Safety is a fundamental need in Maslow's hierarchy of needs, along with food and water, and Americans are feeling increasingly insecure.

  1. Are Small Cap Stocks Ready for a Rebound?

During President Trump's administration, U.S. small-cap stocks, as measured by the , performed competitively with him as Trump shifted the government's attention to domestic politics. This, along with the 2017 tax reform law, a historic wave of deregulation, low borrowing costs and low inflation, helped smaller, “America First” businesses thrive.

Today, the market looks very different. Since the start of Biden's presidency, the S&P 500 has advanced nearly 40%, with most of those gains coming in the past four months as investors, anticipating rate cuts in 2024, scrambled to gain exposure to big artificial intelligence (AI) stocks. such as Microsoft (NASDAQ:), Alphabet (NASDAQ:) and NVIDIA (NASDAQ:). By comparison, the Russell 2000 has been essentially flat over the same period.

What this means is that small caps are now at their lowest valuation relative to large caps since the dot-com bubble more than 20 years ago. A purchasing opportunity?

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A graph with a line going up. Automatically generated description.

Like immigration, I think a second Trump term would begin to support domestically focused, mom-and-pop style stores and businesses. During his administration, optimism among American small businesses was consistently high, with the National Federation of Independent Business (NFIB) Small Business Optimism Index reaching an all-time high reading of 108.8 in August 2018. Since then, the index has fallen more than 17%, registering 89.9 in January 2024.

  1. New commitment to American energy

The last area I want to address is energy, which many voters and investors also associate with Trump.

During his administration, gasoline prices remained on the low end as producers kept oil flowing. This came to a screeching halt four years ago with the pandemic, but the United States has since regained its status as the world's leading supplier of crude oil. In December 2023, the latest month with available data, the United States produced a staggering 13.3 million barrels per day on average. This resulted in a new record amount of oil pumped in a single year, surpassing the previous record set in 2019, when the United States produced 4.49 billion barrels.

Interestingly, producers have managed to do this even as the number of active oil rigs in North America continues to decline. According to Baker Hughes, there were 506 active rigs at the beginning of March 2024, about 70% less than the October 2014 peak.

A graph of a chart showing the amount of high prices.  Automatically generated description with medium confidence.

A graph of a chart showing the amount of high prices. Automatically generated description with medium confidence.

So what's up? A new report from the US Energy Information Administration (EIA) asks precisely this question and concludes that new and improved technologies, including hydraulic fracturing (fracking) and horizontal drilling, “have increased well productivity , allowing American producers to extract more from newly drilled wells.” maintaining the production of the inherited wells.”

In other words, producers today can do much more with much less.

As such, Trump 2.0 would have even less incentive to continue subsidizing renewable energy development. Last year, he was reported to “gut” the Inflation Reduction Act (IRA), Biden's signature climate legislation, packed with tax incentives, financing and loans to help the economy transition to clean energy.

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Disclaimer:

Past performance does not guarantee future results. All opinions expressed and data provided are subject to change without notice. Some of these views may not be appropriate for all investors. By clicking on the links above you will be directed to third party websites. US Global Investors does not endorse all information provided by this/these websites and is not responsible for their content.

The S&P 500 is widely considered the best indicator of large-cap U.S. stocks and serves as the basis for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% of the available market capitalization coverage. The Russell 2000 Index is comprised of the 2,000 smallest companies in the Russell 3000 Index, representing approximately 8% of the total market capitalization of the Russell 3000. The National Federation of Independent Business Small Business Optimism Index ( NFIB) is a monthly data indicator that indicates the health of small businesses in the U.S. The index is a combination of 10 seasonally adjusted components that measure the expectations and outlook of small business owners. The Baker Hughes North American Rotating Rig Count is a weekly census of the number of drilling rigs actively exploring or developing oil in the United States and Canada.

None of the US Global Investors Funds owned any of the securities mentioned in this article as of 12/31/2023.

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