Four More Years

Donald Trump wins again... The economy and inflation mattered... Stocks lift off... What comes next... History doesn't always rhyme... More woes for Super Micro Computer... Nvidia adjusts on the fly...

He's back...

By what looks like a relatively comfortable margin, Donald Trump has been elected the 47th president of the United States. The result sets him up to become just the second U.S. president to serve two nonconsecutive terms, joining ol' Grover Cleveland of the late 19th century.

Of course, a lot has happened since Trump left the White House in 2021.

Sticking to the economic points... post-pandemic inflation peaked in the summer of 2022, and higher prices have remained painful for many. The U.S. avoided an "official" recession amid the Federal Reserve's interest-rate-hike spree to combat said inflation, but Americans didn't agree with the government's rosy economic pronouncements.

Eight years after his first "stunning" win, Trump's message and persona resonated with enough Americans again... while Kamala Harris' did not. As of this writing, Trump was ahead in all seven critical swing states – five of them by at least 2%.

You'll hear a lot of analysis about why, but the choices of one demographic group stand out to me (Corey McLaughlin) the most.

According to various exit polls, Trump's share of the votes from Latino men jumped by a huge margin, around 18 percentage points in one major poll, compared with Trump's 2020 race against Joe Biden.

Why?...

Well, to paraphrase James Carville's famous quip of the early 1990s, "It's the economy (and inflation), stupid."

Here's the lead today from a good, comprehensive recap of the presidential-election results from USA Today. It discussed why Latino men, who "disproportionately work low-paying and hard-labor construction and maintenance jobs," may have turned out for Trump...

A realignment among Latino voters – and a smaller shift among Black voters in key swing states – helped catapult Donald Trump to his victory over Kamala Harris as the Republican nominee expanded his support by peeling off voters from two core Democratic constituencies.

And the signs of a shift might have been there all along.

While Harris spent much of her campaign attacking Trump as a dangerous former president out for revenge and power, polling consistently showed voters preferred Trump over Harris to address their top priority: rising costs and inflation.

Although Trump didn't win a majority of either group, he won support from about 13% of Black voters nationally and 45% of Latino voters, according to CNN exit polls. In the 2020 election, Trump won just 8% of Black voters and 32% of Latinos.

Those are substantial gains versus just four years ago. And at first blush, they helped Trump perform better in swing-state cities like Philadelphia, Milwaukee, Detroit, and others... combined with his support from a base of voters across rural America.

Here's one telling anecdote from Arturo Munoz, a 28-year-old truck driver from Phoenix, Arizona. He said he took his current job thinking it would offer better pay and more opportunities, but that he was doing better working at a gas station in 2016 to 2020. He told USA Today...

I'm pretty sure that Hispanics feel the same way... They'd rather take 2016 to 2020, pay, work hours, provisions, all that stuff, than what they have now for these past four years.

While other issues surely played a role, according to one major exit poll, 31% of voters nationwide said the economy mattered most to them when deciding on their vote... and 45% said their family's financial situation was "worse off than it was four years ago."

Signs of things breaking Trump's way may have been there... even before Harris replaced Biden, the sitting president, as the Democratic nominee. And enough investors may have been anticipating this outcome, as we've written.

But, still, the reality of Trump winning settled in (again) today.

We have liftoff...

All the major U.S. stock indexes opened higher this morning and stayed that way.

The benchmark S&P 500 Index closed 2.5% higher, the Nasdaq Composite Index was up 3%, the Dow Jones Industrial Average was up 3,6%, and the small-cap Russell 2000 Index screamed higher by nearly 6%.

Bitcoin, which trades around the clock, started hitting new all-time highs last night as results began looking favorable for Trump. Overall, the cryptocurrency is up roughly 10% in the past day to around $76,000.

Meanwhile, gold has sold off by nearly 3% in the past 24 hours. Perhaps the "chaos" part of its election-related appeal has lifted – for now.

In general, the U.S. stock market had its best day in two years, with the Dow soaring by more than 1,000 points for the first time since November 2022.

That was in the early days of the current bull run when investors started to believe that 40-year-high inflation had peaked. (The pace did slow down generally, but that didn't reverse price increases at the store. That's what you get from inflation, a product of our fiat-currency system.)

Now, we have good reason to believe that high(er) inflation could reemerge... like it first did in late 2020 and into 2021. Data suggests it may already be happening, and more bond investors are betting on it now.

The 10-year Treasury yield jumped by about 15 basis points today to above 4.4%. The 30-year was about 17 basis points higher, to 4.6%. Even shorter-term bonds were higher, like the 2-year Treasury (up 9 basis points, close to 4.3%).

Ultimately, if we're right and higher inflation does return, it would set the stage for another 2022 situation – with the Fed raising interest rates again to "fight" it.

We're not there yet, though. For a day at least, the market is ginned up again like it's November 2016.

What comes next...

While one large overhang of uncertainty – the election result and an expected transition of power – appears to be settled for now, market attention will now turn to "what happens next," including policy proposals.

"Drill, baby, drill," has been promised by Trump. Interestingly, oil prices were down today – which makes sense if more supply is coming to market – while the energy sector of the S&P 500 was up roughly 4%.

Trump has also promised tariffs and a continuation and/or expansion of his 2017 tax cuts. A lot of what happens on that front still has to do with the full makeup of Congress, which hasn't been decided.

Last night, Republicans took a majority in the Senate, but it could take several more days to determine which party will control the House.

Whether or not we see a "red sweep" could have major implications for specific industries and companies within them in the next few years. Energy is one sector that comes to mind... Financials, which led all major sectors today, and health care – which was close to flat – are others...

The makeup of Congress will also determine the scale of federal spending... and, in turn, federal debt. This will become a talking point again by late next month (and then, again, early in the Trump administration) when Congress must pass another bill to keep the government funded.

In the shorter term tomorrow, investors will consider a Fed meeting, likely paired with a 25-basis-point interest-rate cut.

History doesn't always rhyme...

We contend that Mark Twain was correct when he said, "History doesn't repeat itself, but it often rhymes."

We look to history for indicators of what might happen in the future. But that doesn't mean history always rhymes. There's nuance to precedent and the present.

Count the 2024 presidential election – and the market behavior ahead of it – as an example.

We've noted the "presidential election" indicator a few times lately...

Before last night, it said that since 1928, if the U.S. benchmark stock index had been up in the three full months ahead of Election Day, the incumbent president or party won the White House more than 85% of the time (12 of 14 instances).

This year makes it 12 of 15, dropping the percentage to 80%. The S&P 500 was up 3.3% from July 31 to October 31, which had pointed to a Harris win.

Similarly, but with some more nuance, another indicator said that since 1932, the incumbent or incumbent party has never failed to win reelection unless a recession occurred during the current presidential term. "Officially," this didn't happen. However, as I wrote just last week...

Now, you can debate whether that has been the case or not this time around. After all, inflation-adjusted U.S. GDP did contract for two straight quarters in 2022 during Democratic President Biden's term, but the powers that be never called an "official" recession because the unemployment rate was so low.

One could also argue that the Biden administration manipulated numbers and conclusions to produce favorable results in an election year. I won't argue with you.

I said that because we know what we've heard and seen about inflation and the economy over the past several years. Given this election result, it appears a lot of other people believed their own eyes and ears over what the government was telling them, too.

We'll have more on the consequences of the election results in the days and weeks ahead. (I'd love to hear your thoughts, too, on the election and why you think things turned out how they have. As always, send your comments to [email protected].)

Moving on, we've got a cautionary tale to update you on...

We've covered issues at Super Micro Computer (SMCI) recently... The company, which makes servers that contain AI chips, has become a cautionary tale about the AI boom.

The stock is already down about 80% from its highs in March, and it's facing a long list of problems – most notably, allegations of shenanigans on its financial statements.

And the company just had another bad day...

In its preliminary earnings report Tuesday afternoon, Super Micro estimated that its most recent quarterly revenue came in at between $5.9 billion and $6 billion, below both its own forecast and Wall Street's estimate. Its outlook for the current quarter came in well below what Wall Street was expecting, too.

Now, on to the accounting issues. As we discussed last week, the company's auditor – Ernst & Young – resigned because it became "unwilling to be associated with the financial statements prepared by" Super Micro.

Super Micro said that an independent investigation found no evidence of fraud or accounting misconduct. But the investigators did recommend "a series of remedial measures" to strengthen its governance, so the report didn't exactly fully exonerate the company.

After missing the filing date last month for its annual 10-K paperwork, Super Micro received a notice that its shares would be delisted from the Nasdaq if it didn't file within 60 days. That was on September 20 (47 days ago).

In the earnings update, the company said it has no timeline for when it will file the 10-K. So it looks like a delisting is a real possibility, and that would send shares even lower.

All around, it was an ugly report for Super Micro. And investors are fleeing the stock. Shares were down almost 20% today, taking the total decline from its highs earlier this year to 80%. It could go even lower depending on how things go from here.

Nvidia (NVDA) isn't sticking around to find out...

The dominant AI chipmaker – which became the world's largest company by market cap this week – has an important, overlooked symbiotic relationship with Super Micro.

According to Bloomberg, Super Micro – which uses chips from Nvidia and others to make servers for data centers – is Nvidia's third-largest customer, accounting for more than 10% of its revenue.

Nvidia is also Super Micro's largest client. It buys servers to make the AI data centers that in part have fueled the company's growth.

Well, with the uncertainty around Super Micro's accounting, Nvidia isn't taking any chances. A report from tech news service DigiTimes said that Nvidia is rerouting orders originally placed with Super Micro to rival companies, to make sure that its supply chain isn't disrupted.

If this trend continues, it's more bad news for Super Micro. Not only is it restating financials and facing a potential delisting, but it may be losing one of its largest customers. As Stansberry's Investment Advisory lead editor Whitney Tilson wrote last week, continue to avoid the stock. On the other hand, Nvidia appears to be adjusting on the fly quite well.

Speaking of the AI leader...

One final thing before we go today...

Don't forget to check out the latest free presentation from Marc Chaikin, our friend and founder of our corporate affiliate Chaikin Analytics. Marc's a true Wall Street legend, with more than five decades of experience, and we learn something new every time we talk with him...

Recently, he debuted a brand-new presentation in which he talks about the "next phase" of the market beginning in just a few days... He mentions Nvidia's upcoming earnings report as being a potential catalyst for "very big surprises... which will accelerate the rotation of smart money we've already seen this year."

Marc explains how to spot where this "smart money" is flowing today, and he advises pairing his short-term trading strategy – which tracks "stealth accumulation" in certain stocks in the market and that has waited his entire career to unveil publicly – with a long-term portfolio to take advantage.

Marc has gotten an overwhelming positive response to this presentation... He also applied his "stealth" system to Stansberry Research's stock recommendations... creating a brand-new portfolio of the 10 highest-performing stocks that our Stansberry editors have recommended.

Click here to watch now.

New 52-week highs (as of 11/5/24): Alpha Architect 1-3 Month Box Fund (BOXX), Brown & Brown (BRO), Peabody Energy (BTU), Maplebear (CART), Consol Energy (CEIX), Compass (COMP), Electronic Arts (EA), Expedia (EXPE), Gilead Sciences (GILD), Generac (GNRC), HealthEquity (HQY), Illumina (ILMN), Cheniere Energy (LNG), London Stock Exchange Group (LNSTY), Masimo (MASI), Mueller Industries (MLI), ONEOK (OKE), Packaging Corporation of America (PKG), Ryder System (R), Sprouts Farmers Market (SFM), Snap-on (SNA), Texas Pacific Land (TPL), Twilio (TWLO), Visa (V), and Zoom Video Communications (ZM).

In today's mailbag, thoughts on yesterday's edition, in which we talked about the ever-growing U.S. debt and pandemic-stimulus fraud... Do you have a comment or question? As always, send your notes to [email protected].

"Government debt [is] $35 trillion and going higher every day. No one talks about the only way to solve the problem. Andrew Jackson was one of the few with the stones to actually fix the debt problem and he was the only one to ever pay off the debt. What did he do? He fulfilled his campaign promise and he 'killed the bank'. Yes, he got rid of the private bank that printed out money that enslaved us with debt. Constitutional money allows for transaction with no debt and interest payments. Congress makes money, or it should, not international private bankers. The answer to government debt lies in our past. Politicians, read about Andrew Jackson. Therein is the solution." – Subscriber Mark M.

"Hi, Corey. I too have been curious about the COVID payment fraud claims, so thank you very much for that. I do believe, though, that the response to this cannot be that the COVID relief program should never have been initiated, as that would have been an unmitigated disaster for the economy and millions of people. The answer has to be, 'Do it freaking better.'" – Subscriber Sherwin R.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
November 6, 2024

Stansberry Research Top 10 Open Recommendations

Top 10 highest-returning open stock positions across all Stansberry Research portfolios. Returns represent the total return from the initial recommendation.

Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio.

Top 5 Crypto Capital Open Recommendations

Top 5 highest-returning open positions in the Crypto Capital model portfolio

Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio.

Stansberry Research Hall of Fame

Top 10 all-time, highest-returning closed positions across all Stansberry portfolios

^ These gains occurred with a partial position in the respective stocks.
* The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%.

Stansberry Research Crypto Hall of Fame

Top 5 highest-returning closed positions in the Crypto Capital model portfolio