Weekly Brief #53
What is happening recently? “Trump Pump,” explained, Amazon announces Amazon Haul, Spirit plans to file for bankruptcy, Shopify beats and accelerates, Disney’s CEO succession (cont.), and more.
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Good morning investors 👋,
Welcome back to the 53rd Weekly Brief.
Ever since Donald Trump won the U.S. presidential election, the market has gone haywire — and not just the stock market. Everything from equity indexes to crypto, rising to prices never seen before in history. Some are calling it the “Trump Pump.” My question is simple: why? Why is the market rising so much, hitting all-time highs, and continuing to soar because of Donald Trump’s win?
Let’s get into it. (10 min read)
In this issue:
📈 “Trump Pump,” explained
📦 Au revoir Temu, hello Amazon Haul
🇮🇹 Italy struggles with NATO spend
FEATURED STORY
📈 “Trump Pump,” explained
A couple of weeks ago, right before the 2024 U.S. election, I wrote how Donald Trump, if he were to win, would be an amazing win for the stock market. Once he won, the market rebounded. Another week followed, and today, we’re at all-time highs. Somewhere in this two-week period, the S&P 500 had one of its largest single-day gains in history.
It’s incredible. I thought this would happen, but not with this intensity.
Trump — rising up with a fist pump after being shot in the ear, followed by a landslide election victory not seen in 132 years — singlehandedly restored U.S. stock market sentiment.
And here’s why the market reacted so favourably:
Trump’s economic policy
Outcomes from elections come down to policy — can you believe it? Politics… is actually about politics. No, really. That’s the simple reason behind the barbaric rise in U.S. equity prices recently (and I said this before)!
What I wrote in Weekly Brief #51, right before the election:
Donald Trump’s economic plans focus on corporate tax cuts, deregulation, and increasing domestic manufacturing through tariffs and incentives. A major point for the Trump campaign is the placement of tariffs on foreign goods to bolster a better domestic manufacturing industry and to raise federal revenue. Trump holds very stock market-friendly policies, with a huge part of his economic policy involving corporate tax cuts and an end of suppressing American businesses with taxes to ‘let them flourish.’
Trump’s tax cuts are expected to reduce federal revenue by approximately $3 trillion over the next decade, while the proposed tariffs could potentially generate between $300 billion to $600 billion in additional revenue. The net effect of these policies would result in a massive revenue loss for the federal government, estimated between $2.4 trillion and $2.7 trillion over ten years (that’s after accounting for tariff revenues).
… Unless Trump follows through with his aggressive tariff plan, he’ll need to find trillions of dollars worth of spending to offset his tax cuts. This is without mentioning the economic effects on consumer products following aggressive tariff policies, which would cost the American consumer an additional $4,000 per year and could potentially lead the U.S. economy into a recession. The only real mention of cutting spending came from Elon Musk, who Trump may appoint to lead cost cuts in government agencies in his second term.
Trump is the best candidate for mine and everyone’s stock portfolio, but at a huge long-term cost for the U.S. economy and its rising defict. Trump would need to apply these tariffs very strategically to avoid economic recession and a surge in prices for consumers (among many other things), to justify such a high increase in the cost of the national deficit.
… Even though Trump’s economic policies and corporate tax cuts would benefit the stock market and increase the profitability of American businesses by a large margin (along with a flourishing in the American manufacturing sector and faster GDP growth), the actual cost of these great things far outweighs the potential good to come from them, in my eyes. Trump’s policy would cut tax revenue by trillions, increase tensions with China, hurt the U.S. consumer with increased prices, and would put the economy at high risk of reccession.
Maybe he can grow the economy at a faster rate than the total of his defict with his policies. If he does, that would be great. But time will tell.
… Trump is the best option for the stock market and manufacturing, fuelled by his proposed tax cuts, which would lead to a drastic increase in the profitability of American businesses and most likely a surge in public markets and job growth.
Full post:
Most of my predictions here, to no surprise, came true after his win. I say ‘no surprise’ not because I’m a stuck-up, no-good-for-nothing who thinks I’m all cool for predicting the future, but because what I wrote wasn’t a prediction; it was a thesis based on hard facts. Turns out, facts don’t lie.
Since his win (roughly):
Nasdaq: +4.90%
(then dropping 2.27% this Thursday)
S&P 500: +3.78%
(then dropping 0.60% this Thursday)
Dow Jones: +4.91%
(then dropping 0.47% this Thursday)
My Portfolio: +5.60%
(then dropping 0.39% this Thursday)
Keep in mind the average annual return of the stock market is 8-10%. This data is from the last 10 trading days.
Something I didn’t mention much in my prior articles was Trump’s increasing push into crypto during his campaign, even going as far as launching his own cryptocurrency. It failed, but it’s still notable, as this push of interest from the Trump campaign made a huge splash once he was elected, sending the price of Bitcoin up over 31% and allowing crypto assets globally to cross $3.11 trillion for the first time ever.
Trump is, and always has been, a very pro-corporate politician. In his new term, he plans to live up to this reputation (something he spoke about greatly on the campaign trail). I continue to be optimistic about the future of the United States as a place of investment, even more so under Trump’s expected pro-corporate leadership. Of course, it’s not just me who’s optimistic. The entire market is feeling positive. And these are the reasons why.
Great for the stock market, bad for the national deficit… or so I thought. But that’s a discussion for another time. Make sure to check out the paid subscription and this week’s book recommendation at the bottom of toda’s post. Here’s my full bookshelf if you’re curious! Enjoy the rest of today’s issue.
FINANCE
a. ✈️ Spirit plans to file for bankruptcy
Spirit Airlines, the seventh-largest airline in North America, has reportedly begun planning to file for Chapter 11 bankruptcy protection, with an announcement expected over the coming weeks. This follows the fallout of its merger attempt with Frontier Airlines, just months after a U.S. judge blocked its proposed merger with JetBlue. It’s been a tough year for Spirit.
Airlines are notoriously crap investments, burdened by what has been1 with massive debt to cover high maintenance costs while keeping prices low to attract passengers. This is precisely why Spirit has struggled: overwhelming debt. Recently, the airline has been in talks with bondholders to restructure its debt, a move that could result in the cancel of its existing stock.
b. 🛍️ Shopify beats and accelerates
The second-largest position in my stock portfolio released its Q3 2024 earnings this week, and wow, was it outstanding. Here are some key highlights from the report (via Yahoo! Finance):
Revenue: $2.16 billion vs. $2.11 billion estimates (2.2% beat), growing 21% year-over-year.
Revenue guidance for Q4 2024: $2.73 billion vs. estimates of $2.63 billion (3.8% beat), implying 28% year-over-year growth (amazing!).
Gross margin (GAAP): 51.7%, consistent with the same quarter last year.
Operating margin: 13.1%, up from 7.1% in the same quarter last year.
Free cash flow margin: 19.5%, up from 16.3% in the previous quarter.
Overall, I’m very pleased with these results and extremely happy to be a shareholder heading into the holiday season.
Related articles:
BUSINESS
c. 📦 Au revoir Temu, hello Amazon Haul
This week, Amazon announced its official rival to Temu and Shein, called Amazon Haul, leveraging its brand to gain a share in the low-cost, long-shipping-time e-commerce market. This wasn’t a risk for Amazon in the first place, as there wasn’t any noticeable impact on its fundamentals. However, some online Amazon bears thought of it as a risk. Amazon seemingly agreed with them, and acted.
The new store, accessible via the Amazon mobile app or web, offers discounted, mass-produced items shipped from China. While this isn’t something necessary for Amazon to thrive as an investment over the coming decade or longer, it goes to show how adaptive Amazon is as a business — something I outlined in my Amazon analysis. Bullish Amazon.
Related articles:
d. 🐭 Disney’s CEO succession (cont.)
Well, Disney investors have been… how do you say it… on a ride of a lifetime recently, thanks to the mishaps and misdirection of the company’s management. As an investor, I’ve felt this misdirection. An amazing company with amazing brands and assets, run by idiots who aren’t focusing on what makes Disney great — making great content.
I’ve had many conversations about Disney over the past week, including discussions involving the rumours of EA’s CEO running for the replacement as Disney’s CEO once Bob Iger resigns in 2026. The only thing stopping Disney stock from moving is the inability of management to focus on the consumer and the business at the same time. What makes a business great is selling a good product, and that reciprocates to investors.
Disney won’t be going anywhere, it’s longlasting. But Bob Iger isn’t, and the new CEO will determine whether or not the direction of the business aligns with the direction the company needs to go in to be great. I’ll be following this story as it grows, and I thought it was worth sharing my thoughts.
Related articles:
POLITICS
e. 🇮🇹 Italy struggles with NATO spend
This week, Italy urged the European Union to approve bond issuance needed to finance its defense spending, over concerns that it won’t meet NATO’s defense spending target of 2% of GDP by 2028. Italy even went as far as saying the target “conflicts with the EU’s fiscal rules.”
Since August, Italy has stated that it’s very unlikely it will meet the spending target and deadline, projecting defense spending at just 1.61% by 2027 (despite setting aside >€35 billion for defense). What makes matters worse is that Italy’s public debt, the 2nd-largest in the euro zone, is expected to rise to ~138% of GDP by 2026. And with Trump elected president, like his first term, Europe is expecting heavy discussions about the NATO spending target.
Related articles:
📚 Book of the Week
⭐️ For every book purchased using the links below, 100% of affiliate commissions are donated to charity. (Amount donated so far: $30.00.)
Rewire - Nicole Vignola
Book Description:
Are you stuck in a habit of believing you are not good enough?
Do you fixate on a particular story about yourself that you wish you could change?
Are negative beliefs holding you back from reaching your fullest potential?
Do you sometimes feel like it’s just too hard, or too late, to change?
If any of this sounds familiar, you need Rewire, your personal guide to understanding the neuroscience of why you are subconsciously programmed to repeat certain habits and how you can do, or undo, any type of behavior to be the person you want to be.
Thanks for reading! Feel free to reply to this email or comment on the web if you need anything — I always reply. If you enjoyed today’s issue, feel free to share it with friends and family.
All the best,
Jacob
Jacob, you write with the energy of someone trying to explain Wall Street to their favorite niece over breakfast - and I mean that in the best way.
Your analysis is sharp, but the little moments, like calling Spirit Airlines a "holiday bully," sneak in a humor that keeps readers nodding along. The way you balance optimism about Trump’s market impact with caution over long-term consequences feels grounded, not preachy. Like a friend saying, "Hey, this could work, but buckle up."
Great stuff - keep it coming!
Fantastic earnings by Shopify indeed. Stock's been on my watchlist for some time now but haven't bought...