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How to protect your portfolio against risks tied to President-elect Trump's tariff agenda

Aseem — Sat, 16 Nov 2024 16:00:02 +0000

Money manager John Davi is positioning for challenges tied to President-elect Donald Trump’s tariff agenda.

Davi said he worries the new administration’s policies could be “very inflationary,” so he thinks it is important to choose investments carefully.

“Small-cap industrials make more sense than large-cap industrials,” the Astoria Portfolio Advisors CEO told CNBC’s “ETF Edge” this week.

Davi, who is also the firm’s chief investment officer, expects the red sweep will help push a pro-growth, pro-domestic policy agenda forward that will benefit small caps.

It appears Wall Street agrees so far. Since the presidential election, the Russell 2000 index, which tracks small-cap stocks, is up around 4% as of Friday’s close.

Davi, whose firm has $1.9 billion in assets under management, also likes staying domestic despite the tariff risks.

“We’re overweight the U.S. I think that’s the right playbook in the next few years until the midterms,” added Davi. “We have two years of where he [Trump] can control a lot of the narrative.”

But Davi plans to stay away from fixed income due to challenges tied to the growing budget deficit.

“Be careful if you own bonds for sure,” said Davi.

Since the election, the benchmark 10-year Treasury yield is up 3% as of Friday’s close.

Stock futures are little changed as Wall Street looks to extend postelection rally: Live updates

Aseem — Fri, 08 Nov 2024 01:15:15 +0000

Traders work on the floor of the New York Stock Exchange during the morning trading on November 07, 2024 in New York City.

Michael M. Santiago | Getty Images

U.S. stock futures hovered near the flatline Thursday night after the S&P 500 and Nasdaq Composite hit records in a postelection rally and investors weighed the Federal Reserve’s latest interest rate cut.

S&P 500 futures and futures tied to the Dow Jones Industrial Average each added less than 0.1%. Nasdaq 100 futures were little changed.

During Thursday’s trading session, the broad market index gained 0.7% to close at a new record. The tech-heavy Nasdaq jumped 1.5% and ended the session above 19,000 for the first time. Meanwhile, the 30-stock Dow was marginally lower. The three major averages all hit intraday record highs during the session.

The moves higher continue the market rally from Wednesday in the wake of President-elect Donald Trump’s victory, during which the Dow and S&P 500 rose to their best days since November 2022.

Meanwhile, the Fed lowered interest rates by a quarter point, in-line with the market’s expectations. Fed Chair Jerome Powell noted he is “feeling good” about the economy during a press conference.

However, “the path of Fed cuts is cloudier today than it was a week ago before the election,” said Scott Helfstein, head of investment strategy at Global X ETFs.

Investors generally view a Republican-controlled government as more favorable on expectations for deregulation, the potential for more mergers and acquisitions and proposed tax cuts. However, concerns over the large federal deficit and increased tariffs have also sparked concerns of an uptick in inflation.

“The market is signaling that a Trump administration would be good for growth and risk assets, but the combination of faster growth with new tariffs would be inflationary,” he added. “While the Fed feels the risks are balanced between stable prices and maximum employment, this could shift quickly increasing the risk to reaccelerating inflation.”

The postelection surge put all three of the major averages are on pace for strong weekly gains, with the S&P 500 up about 4.3% and the Dow higher by nearly 4%. Both indexes are on track for their best week since November 2023. The Nasdaq is the outperformer of the three, toting a 5.6% advance through Thursday’s close.

Trump is Likely to Allow US Fed Chair to Serve Remainder of His Term, Adviser Says

suimt — Fri, 08 Nov 2024 00:30:39 +0000

Last Updated:November 08, 2024, 00:54 IST

The adviser cautioned that US President-Elect Donald Trump could always change his mind, but his present view is that Powell should remain atop the central bank.

President-elect Donald Trump appointed Jerome Powell to lead the Federal Reserve in November 2017.

President-elect Donald Trump remains likely to allow Federal Reserve Chair Jerome Powell to serve out the remainder of his term, which expires in May 2026, according to a senior adviser to Trump who requested anonymity to describe private conversations.

The adviser cautioned that Trump could always change his mind, but his present view — and that of Trump’s economic team — is that Powell should remain atop the central bank as it pursues its policy of cutting interest rates. Trump in July told Bloomberg he had intended to keep Powell in his role at least for the duration of his term.

Trump appointed Powell, a Republican former private equity executive who served on the central bank’s governing board, to its top spot in 2018.

President Joe Biden reappointed him to a second four-year term.

Gary Cohn, the Goldman Sachs alum who served as economic policy director during Trump’s first administration, is said to want the job, but former Trump officials have said the fact that Cohn resigned in protest over Trump’s steel tariffs makes it highly unlikely he’d get it.

Among the names mentioned by sources in touch with the Trump transition are Kevin Warsh, who served for five years on the bank’s board of governors and advised Trump during his first term; as well as Trump’s former chief economist Kevin Hassett.

In July, before Trump was elected, the Fed chair was asked whether he intended to serve out the remainder of his term, and he said, unequivocally, “Yes.”

Trump has frequently aired frustrations with Powell and occasionally threatened to remove the Fed chair from his post, which no president has ever done.

Trump has also criticized what he perceives as a lack of transparency by the Fed, which conducts its policy deliberations in private and releases the notes from those discussions weeks later. CNN has reported that Trump aides have suggested he would like real-time release of those minutes and economic reports and for the meetings to be conducted on-camera.

Trump’s fraught history with Powell

Trump and Powell clashed several times during his first term, with the president-elect threatening to fire him from the post on several occasions.

In 2018, Trump said he was considering replacing Powell with a new Fed chair after the central bank raised interest rates. A president, however, cannot easily remove a Fed chair once confirmed unless they break the law.

After markets tanked at the onset of the pandemic in March 2020, Trump told reporters he had the “right to remove [Powell] as chairman,” adding that “he has, so far, made a lot of bad decisions, in my opinion.”

More recently, Trump also said the Fed chair is among the easiest jobs in the government. “You show up to the office once a month and you say, ‘Let’s flip a coin,’ and everybody talks about you like you’re a god,” Trump said last month at an event hosted by the Economic Club of Chicago.

President-elect Donald Trump appointed Jerome Powell to lead the Federal Reserve in November 2017. President Joe Biden reappointed him five years later for another term as Fed Chair that is set to expire in 2026.

Trump also said his prior threats to remove Powell “because he was keeping the rates too high” caused the Fed chair to lower rates “too much.”

While the Fed chair has the most clout at Federal Open Market Committee meetings, they are not the only official to determine where interest rates should be. At every monetary policy meeting there are 11 other Fed officials who vote on interest rate moves.

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