Spencer Li

Monthly Market Wrap (June 2025)

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Macroeconomic Indicators and Central Bank Policy

The U.S. Federal Reserve held its benchmark interest rate steady at 4.25% to 4.50% during the June 2025 FOMC meeting, the fourth consecutive pause. However, the Fed’s latest projections signaled potential rate cuts later in the year. Policymakers penciled in two quarter-point cuts by year-end amid signs of moderating inflation and softer economic momentum. Other central banks were also closely watched; for example, the European Central Bank and Bank of England maintained a tightening bias given still elevated inflation (though no major surprise moves were reported in June).

U.S. inflation remained modest. The Consumer Price Index (CPI) for May (released in June) rose just +0.1% month on month and +2.4% year on year, slightly cooler than expected as cheaper gasoline offset rising rents. Core CPI (excluding food and energy) was up 2.8% YoY. While current inflation is near the Fed’s target range, tariffs imposed by the Trump administration are expected to push prices higher in coming months.

In fact, retailers like Walmart warned they would raise prices by June due to tariffs, and the Fed’s preferred core PCE index came in a bit hotter than anticipated. Nonetheless, the subdued May inflation data gave markets hope that price pressures were easing for now, and Treasury yields actually fell on the news.

The labor market remained relatively strong but showed hints of cooling. U.S. unemployment stayed near historically low levels (in the mid 3% to 4% range) as of June, and the Fed noted the jobless rate “remains low.” However, some softening signs emerged: a private payrolls report (ADP) showed only approximately 37,000 jobs added in May, and weekly jobless claims ticked up slightly.

The Fed actually revised up its year-end unemployment forecast to approximately 4.5%, anticipating a mild rise in joblessness ahead. Overall, employment is still robust but not as red-hot as before, which, alongside cooling inflation, bolsters the case for the Fed to hold or cut rates in coming months.

Globally, growth signals were mixed. China’s manufacturing PMI for June stayed below 50 (in contraction) for a third month, though new orders improved slightly, highlighting uneven recovery in the world’s second-largest economy. In Europe, inflation remained above target, keeping pressure on the ECB, but European economies showed resilience with strong equity performance (helped by a weaker USD and easing trade fears).

Commodity prices were volatile (see below), reflecting geopolitical risks. Overall, macroeconomic conditions in June featured cooling inflation and a still tight but slightly softening labor market, allowing central banks (notably the Fed) to stand pat and mull future easing, while tariff actions and overseas developments injected uncertainty.

Major Political and Geopolitical Developments

Trade policy was a key market driver in June. Early in the month, U.S. and China negotiators reached a framework to revive their trade truce from 2023, which helped improve sentiment. However, many U.S. import tariffs remained in place. The effective U.S. tariff rate had jumped to approximately 13% (from 3% in January) due to President Donald Trump’s new “Liberation Day” tariffs, and unresolved issues (like China’s export curbs on rare-earth metals) kept trade uncertainty alive.

The White House also worked on trade deals with other partners; for instance, a potential agreement with China was signed (pending implementation) and deals with 10 other countries were hinted at. Notably, Trump delayed a threatened 50% tariff on EU imports, pushing its implementation beyond the original July deadline, which gave European markets a boost. Trade headlines thus oscillated between progress and new threats.

In domestic politics, Congress advanced a sweeping package dubbed the “One Big Beautiful Bill.” In late June, the Senate moved forward with this bill, which aims to make the 2017 tax cuts permanent (locking in lower individual tax rates) and increase spending on border security, defense, and energy. To offset costs, certain social programs face cuts. The bill also proposes raising the debt ceiling by 5 trillion dollars (versus 4 trillion in a House version) to ensure the government’s borrowing needs are met.

While potentially supportive of economic growth (via tax relief and spending), the package could add an estimated 1 to 2 trillion dollars to deficits. Its progress was closely watched by markets, as it signaled the fiscal policy trajectory heading into 2026. Meanwhile, President Trump kept up pressure on the Federal Reserve, publicly urging a 1% rate cut and even musing about replacing Fed Chair Jerome Powell ahead of Powell’s 2026 term end. This unprecedented political pressure on the Fed raised some concerns about central bank independence and added a layer of uncertainty to interest rate expectations.

Geopolitics were front and center in June, impacting various asset classes. In the Middle East, tensions flared between Iran and Israel. Escalating conflict including a U.S. airstrike on Iran’s underground nuclear facilities on June 22 stoked fears of a broader confrontation. In response, oil prices spiked to around 75 dollars per barrel in mid-June on worries about supply disruptions. Fortunately, a cease-fire agreement was reached later in the month, easing those fears. Oil prices retreated to the mid 60s by month-end as the risk premium faded. Global markets, initially jolted by the conflict, rebounded once peace prospects improved.

Separately, U.S.–Canada trade friction briefly grabbed attention: after Canada imposed a digital-services tax on U.S. tech companies, President Trump declared an abrupt halt to trade talks and threatened retaliatory tariffs on Canada within a week. Although this Canada spat injected midday volatility, it did not escalate further by month’s close. Overall, June saw high-stakes geopolitical events from Middle East clashes to trade spats that caused short-term market swings but appeared to de-escalate by the end of the month.

Equity Markets Performance

Despite early-June volatility, U.S. equities powered higher in June. The S&P 500 and Nasdaq Composite hit new all-time closing highs by the end of the month. On June 27, both indices notched record closes (the S&P’s first since February, Nasdaq’s first since last December). The Dow Jones Industrial Average also climbed, aided by strong earnings in certain components (e.g. Nike’s surge).

Major indexes posted robust gains for a second straight month, with the S&P 500 up roughly 5% in June and about 11% for Q2, while the tech-heavy Nasdaq jumped about 18% over the quarter, capping its best quarter since 2023. In fact, Wall Street ended the first half of 2025 at record-high levels, recovering sharply from an April pullback.

Market leadership in June tilted towards technology and growth stocks. After a choppy start to 2025, the big “Magnificent Seven” mega-cap tech companies (like Apple, Amazon, Microsoft, Google, Meta, Nvidia, and Tesla) resumed driving the market higher, especially in Q2. The S&P 500’s information technology sector was the top performer, and investor enthusiasm around AI (artificial intelligence) and other innovations propelled names like Nvidia to new heights (Nvidia’s market cap even briefly surpassed all other companies). This narrow leadership sparked some concern, but there were signs of broadening: even the equal-weighted S&P 500 (which downplays mega-caps) was up nearly 4% year to date by early July.

Other sectors also participated in the rally. For example, industrials and cyclicals saw gains as trade news improved, and consumer discretionary got a boost from cooling inflation and wages. That said, defensive sectors (like consumer staples and utilities) lagged during risk-on episodes. Investor sentiment improved markedly compared to the spring, and volatility (VIX) stayed relatively subdued (in the teens), reflecting confidence that the economic “soft landing” might be in sight.

June’s rally was not confined to the U.S. Global equities climbed as well. Developed international stocks outperformed, with the MSCI EAFE index (Europe, Australasia, Far East) up about 11.8% for Q2. Emerging markets gained nearly 12% over the quarter, aided by easing geopolitical tensions and a pullback in the U.S. dollar (which boosts non-U.S. assets). Notably, European indices hit multi-year highs. For instance, optimism over a delayed EU–U.S. tariff helped lift European industrial and auto stocks. In the UK, a major corporate M&A rumor (oil giant Shell reportedly in talks to acquire rival BP) sent BP’s stock nearly 10% higher in late June, highlighting a potential consolidation in the energy sector.

Asian markets were mixed. Chinese stocks struggled amid soft economic data, whereas Japan’s Nikkei continued its strong 2025 run (buoyed by corporate reforms and yen weakness). Overall, equities globally shrugged off many of the prior quarter’s risks, ending June with strong gains across most regions.

Bond markets were relatively stable in June. U.S. Treasury yields oscillated with data and Fed expectations. The 10-year yield hovered around the mid 3% range, dipping slightly after tame CPI data and the Fed’s hold (reflecting hopes for possible rate cuts). Credit spreads narrowed a bit as investor risk appetite improved.

In commodities, oil was the standout mover due to the Middle East turmoil. Crude oil (WTI) surged into the mid 70s per barrel at the height of Iran-Israel tensions, then fell back to approximately 65 dollars as the situation calmed. Gold, often a safe haven, remained elevated. In fact, gold has quietly had a stellar year to date gain (approximately 26% in 2025 so far), reflecting earlier inflation hedging and perhaps some residual geopolitical worry.

Industrial metals like copper saw modest gains in June on hopes of Chinese stimulus, while agricultural commodities were mixed. Meanwhile, the U.S. dollar eased slightly in June against major currencies, partly due to reduced Fed hawkishness and improved trade outlook. This dollar softening provided an extra tailwind to commodity prices and emerging markets.

Notable Corporate Earnings and Stock Moves

Several major companies reported earnings or had significant stock moves in June, influencing sector swings and indices:

Tesla (TSLA): Tesla’s stock plunged approximately 14% in a single day (June 5) after CEO Elon Musk engaged in a very public spat with President Trump. The multi-hour tirade between Musk and Trump, which included Musk claiming Trump “would have lost” without him, and Trump calling Musk “crazy” and threatening to cut off government contracts, rattled investors. Tesla’s market value tumbled by approximately 150 billion dollars, knocking the company out of the trillion dollar market cap club. This high-profile feud contributed to a broader market dip in early June, underscoring how political risk can impact individual stocks. Notably, Tesla shares were already down approximately 20% year to date at that point, amid softening EV demand in key markets.

Nike (NKE): The athletic apparel giant delivered stellar earnings, sparking a big stock jump. Nike reported quarterly results in late June that beat Wall Street expectations, and importantly, management detailed plans to mitigate the impact of tariffs on its supply chain. Shares of Nike surged about 15% on the news, their biggest one-day gain in years, making Nike the top gainer in the Dow and S&P 500 that day. This strong performance in a consumer-facing stock boosted confidence that U.S. consumer demand remains healthy despite trade headwinds.

Nvidia (NVDA): The semiconductor and AI powerhouse extended its remarkable 2025 rally. Nvidia’s stock jumped around 4% to reach new record highs during June, at one point briefly becoming the world’s most valuable company by market cap. Investors piled in due to Nvidia’s leadership in AI chips and robust earnings. By late June, Nvidia’s year to date gain was enormous, and its one-day surge helped it reclaim the title of largest market cap globally. This underscores how AI excitement has made Nvidia a centerpiece of the market’s momentum.

Boeing (BA): Aerospace stocks got a lift from improving trade sentiment. Boeing’s share price climbed approximately 6% in mid-June after a U.S.–China trade framework was announced and analysts at Rothschild upgraded the stock to “Buy.” The upgrade cited accelerating aircraft production and better financial trends for the aviation giant. Since Boeing is a major exporter, progress on U.S.–China trade negotiations (and the delay of tariffs on EU goods, including aerospace) buoyed its outlook. Boeing’s rebound contributed to industrial sector strength and was a positive signal for the air travel and manufacturing outlook.

FedEx (FDX): The delivery and logistics bellwether had mixed news. FedEx announced fiscal Q4 earnings in late June that beat profit estimates, but it simultaneously issued disappointing guidance and suspended its full-year outlook due to economic uncertainty. The cautious forward outlook, after FedEx had already cut forecasts multiple times, spooked investors. FedEx shares fell over 5% in response, continuing a downtrend. FedEx stock was approximately 18% down in 2025 to date. As a global shipper, FedEx is seen as an economic barometer, so its hesitation on guidance fueled some worries about cooling demand in industrial and e-commerce sectors. The stock’s drop also weighed on transportation indices.

Coinbase (COIN): The cryptocurrency exchange operator saw its stock skyrocket in late June, reflecting the resurgence of crypto markets. Coinbase shares jumped nearly 12% in one session and over 40% for June as a whole. The rally was fueled by Bitcoin’s climb to record highs (driving trading activity) and a bullish analyst call from Bernstein, which gave a big price target upgrade. After a tough first half, Coinbase benefited from improving sentiment in digital assets and potentially greater regulatory clarity on crypto in the U.S. The stock’s surge made it one of the top S&P 500 gainers late in the month.

BP (BP) and Energy M&A: In the oil sector, BP PLC (British Petroleum) saw U.S.-listed shares leap almost 10% on reports that peer Shell was in talks to acquire it. Such a megamerger rumor between two of Europe’s largest oil supermajors was significant. It suggested confidence in the energy market’s outlook and potential industry consolidation. While neither company confirmed a deal in June, the news drove BP’s stock sharply higher and lifted energy ETFs. It also sparked debate on antitrust and strategic implications of a Shell-BP combination. Energy stocks overall were volatile due to oil price swings, but this M&A chatter provided a late-month jolt to the sector.

Palantir (PLTR): Data analytics and defense-tech firm Palantir continued its hot streak as an unlikely AI play. PLTR shares hit a fresh all-time intraday high (approximately 148 dollars) during June and were up roughly 90% year to date. Investors have bid up Palantir on optimism about its government contracts (especially given geopolitical tensions) and its pivot into AI-driven software. The stock did pull back slightly on days when geopolitical risks eased (since a chunk of its business relates to defense), but overall Palantir’s momentum underscored the market’s appetite for anything AI or defense-related. Its huge year to date gain made it one of 2025’s best performers so far, albeit with elevated volatility.

Other notable moves: Enphase Energy (ENPH), a solar technology firm, saw seesaw action. It spiked double-digits mid-month on hopes that Congress’s budget would preserve solar tax credits, then fell approximately 5% the next day as those hopes moderated. General Mills (GIS) slipped after missing sales expectations, highlighting consumer staples headwinds. Mega-cap Apple (AAPL) quietly made some gains by late June, though it was more subdued than its peers, finishing the month roughly flat as investors rotated into more “exciting” tech names.

Bitcoin and Ethereum

June 2025 was a milestone month for Bitcoin. The largest cryptocurrency’s price climbed to unprecedented highs, breaching the 100,000 dollar level and closing the month around 107,000 dollars, its highest monthly close ever. In fact, on June 30 Bitcoin traded as high as approximately 108,000 dollars. This rally was fueled by strong institutional inflows. U.S. spot Bitcoin ETFs attracted over 4 billion dollars of net inflows during June, as large investors poured money into bitcoin-backed funds.

BlackRock’s Bitcoin ETF saw record weekly volumes, and overall there were more than 15 consecutive days of inflows into bitcoin ETFs by month-end. This surge of institutional demand provided a firm price floor for BTC. Additionally, a risk-on mood in markets and hopes for regulatory clarity boosted crypto sentiment. By end of June, Bitcoin was up roughly 13% for 2025 year to date, and its total market cap reached about 2.1 trillion dollars, making BTC as large as some of the biggest publicly traded companies.

In contrast, Ethereum (ETH), the second-largest crypto, underperformed in June. Ether’s price fluctuated in the mid 2,000s (around 2,400 dollars at month-end), and it actually declined slightly over the month even as Bitcoin rose. For the first half of 2025, ETH was down over 20%, a stark divergence from Bitcoin’s gains. Several factors explain this lag. Investors are prioritizing Bitcoin due to the ETF-driven rally and its perception as “digital gold,” while regulatory approval for an Ethereum ETF or major institutional product was still lacking.

That said, Ethereum isn’t stagnant. June saw about 1.1 billion dollars of inflows into ETH-based products, including one notable allocation shift by BlackRock from BTC to ETH. Yet Ethereum’s network metrics (such as DeFi activity and NFT volumes) remained tepid, and many altcoins underperformed as Bitcoin dominance rose to approximately 65% of the crypto market. In short, Bitcoin took the spotlight in June’s crypto rally, while Ethereum and others lagged, causing the crypto market’s leadership to narrow.

Crypto markets remained volatile and sensitive to news in June. Mid-month, the Israel-Iran conflict and U.S. strikes in the Middle East triggered a global risk-off move that knocked Bitcoin briefly below 99,000 dollars over a weekend. That dip (over 10% intraday) led to large liquidations of leveraged positions. However, as geopolitical tensions eased with a cease-fire, Bitcoin rebounded swiftly back above 100,000 dollars, demonstrating its resilience. Each pullback was met with institutional buying. ETFs saw their largest single-day inflow of nearly 1 billion dollars during the mid-June dip.

Apart from geopolitics, the crypto space saw positive developments. U.S. regulators continued reviewing multiple spot Bitcoin ETF applications with increasing market optimism for approvals, and some major traditional finance firms hinted at crypto initiatives. There were also technical milestones, such as Ethereum’s network upgrades proceeding quietly in the background. Overall, crypto sentiment improved markedly in June, with Bitcoin’s new highs marking a sense of renewed confidence in digital assets after a shaky start to the year.

Concluding Thoughts

June 2025 was marked by strong equity performance, a cooling macro backdrop, and easing geopolitical tensions. The Fed held interest rates steady while signaling potential cuts later this year, as inflation moderated and labor market strength softened slightly. Political noise from trade tensions and Middle East conflict created short-term volatility, but markets shook it off, with the S&P 500 and Nasdaq hitting record highs, driven by renewed AI enthusiasm and strong earnings from names like Nvidia and Nike.

Bitcoin surged past $100,000 on ETF inflows and institutional adoption, while Ethereum lagged behind. Commodities like oil spiked temporarily on geopolitical risk but faded later, while gold remained strong as a hedge. Global equities joined the rally, aided by a weaker dollar and signs of global economic resilience.

Based on current conditions, investors should maintain a bullish stance on U.S. equities, particularly in sectors such as technology, artificial intelligence, and semiconductors, where companies like Nvidia and Palantir continue to lead. However, it is important to stay alert to any signs of exhaustion or overextension in the mega-cap rally. Defensive sectors like consumer staples and utilities remain under pressure in this risk-on environment and may warrant a reduction in exposure.

For those looking to rotate capital, energy and industrials offer attractive opportunities, especially on market pullbacks, as ongoing trade negotiations and merger activity could continue to support these sectors. In the crypto space, Bitcoin appears to be the clear leader, and investors may consider accumulating positions during periods of weakness, supported by strong institutional demand and sustained ETF inflows. Ethereum and other altcoins, however, continue to lag, and caution is advised until leadership broadens.

A modest allocation to gold remains prudent as a hedge against both geopolitical shocks and rising fiscal risk in the U.S. Looking ahead, Q3 earnings and upcoming economic data should be closely monitored, particularly for early signs that tariffs may be feeding through to inflation or dampening consumer demand. Finally, if the Fed moves toward rate cuts later this year, long-duration Treasuries and high-quality bonds could offer meaningful upside as yields retreat.

In summary, June delivered a textbook “soft landing” narrative. The trend remains up, but selectivity, risk management, and preparation for rotation or volatility spikes are key going forward.

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Spencer Li

Monthly Market Wrap (May 2025)

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Macroeconomic Data and Central Bank Signals

Inflation data showed divergent trends across the globe. In the UK, inflation unexpectedly surged to 3.5% year-on-year in April, a significant jump from March’s 2.6% and the highest level since early 2024. This increase was driven in part by higher travel costs during the Easter period. The surprise figure reduced expectations for an August interest rate cut from the Bank of England, with market odds falling from 60% to 40%, indicating a potentially slower pace of monetary easing.

In contrast, inflation in the U.S. continued to ease. April’s Consumer Price Index rose just 2.3% year-on-year, its lowest level since February 2021, slightly below expectations. Core inflation also moderated to 2.8%, edging closer to the Federal Reserve’s 2% target. This cooling of price pressures has strengthened the belief among many analysts that the Fed is likely finished with rate hikes for now, although officials have not suggested any imminent rate cuts.

Elsewhere, global data presented a mixed economic picture. Japan’s economy shrank by an annualized 0.7% in the first quarter, worse than expected, marking its first contraction in a year. This decline was attributed to weak consumer spending and sluggish exports, even before factoring in the impact of recent U.S. trade measures. Analysts warn that Japan remains especially vulnerable to external shocks such as tariffs from the U.S., complicating the Bank of Japan’s policy path.

In China, April’s data was uneven. Industrial production rose 6.1%, beating expectations, largely due to government support. However, retail sales growth lagged at 5.1%, falling short of forecasts. Export demand also remains under pressure from ongoing U.S. tariffs. Additionally, weak lending figures and persistent deflationary trends point to a need for further stimulus. Mid-May brought a surprise development when Beijing and Washington agreed to roll back most tariffs and pause their trade dispute for 90 days. While this truce offered short-term relief and boosted exports, economists remain cautious, citing the unpredictability of U.S. trade policy.

Political and Policy Developments Impacting Markets

Geopolitical and fiscal developments drove much of this week’s market volatility. In the U.S., concerns over government spending took center stage as lawmakers advanced a large tax and spending package expected to significantly increase the federal deficit. In response, Moody’s downgraded U.S. government debt by one notch, citing persistent and unsustainable fiscal imbalances.

The downgrade jolted bond markets. The yield on the 10-year Treasury note spiked to 4.60% midweek, its highest level since February, before retreating slightly to around 4.5% by the week’s end. An underwhelming 20-year Treasury auction further spooked markets, reinforcing fears of rising borrowing costs amid fiscal slippage. Meanwhile, a looming standoff over the federal debt ceiling added further uncertainty, with the Treasury Department warning that extraordinary funding measures could be exhausted by August.

Later in the week, global trade tensions flared again. Former President Donald Trump reignited fears of a trade war by announcing plans to impose a sweeping 50% tariff on all goods imported from the European Union, effective June 1. The proposed tariff would target a wide array of European products, from luxury goods to pharmaceuticals. Trump also threatened to impose a 25% import tariff on iPhones assembled overseas and sold in the U.S., targeting Apple directly.

These announcements came just after a temporary de-escalation in U.S.–China trade tensions and caught both investors and EU officials by surprise. European leaders hinted at potential retaliation, raising the risk of an escalating global trade conflict. Some analysts described Trump’s strategy as one that could undo recent market gains and reignite instability in global commerce. The tariff threat has left businesses scrambling to assess the implications for supply chains and consumer prices. Walmart’s CEO warned that these taxes would likely lead to higher retail prices, as companies couldn’t absorb the cost increases. Trump dismissed those concerns, suggesting companies should bear the brunt instead of passing it on to consumers. This policy U-turn, from easing tensions with China to confronting Europe, left global markets on edge.

U.S. Stock Market Highlights and Corporate Earnings

After a strong showing earlier in May, U.S. equities stumbled this week due to a mix of disappointing earnings reports and renewed macro concerns. Both the S&P 500 and Dow Jones Industrial Average dropped more than 2% for the week, breaking a three-week winning streak. A steep decline on Friday dragged both indices back into negative territory for the year.

Market volatility surged, with the VIX (commonly referred to as the market’s “fear gauge”) jumping 10% to reach its highest level in over two weeks. Investor sentiment turned cautious, prompting a rotation out of high-growth sectors. Technology, communication services, and consumer discretionary stocks led the pullback, while defensive sectors such as utilities and consumer staples posted modest gains.

Apple’s stock dropped around 3% following Trump’s iPhone tariff threat, marking a two-week low. The sell-off extended across other major tech names: Tesla fell nearly 3%, Nvidia dropped 2%, and Microsoft, Amazon, and Meta also lost ground. Alphabet (Google), however, managed a 3% mid-week gain thanks to renewed optimism about its AI initiatives. Nonetheless, the broader tech retreat ended a strong run for the Nasdaq, which had posted gains in six of the previous seven sessions.

Earnings reports presented a mixed bag, particularly in the retail space. Walmart posted better-than-expected earnings, with an adjusted EPS of $0.61, and reaffirmed its full-year outlook. However, its warnings about higher prices due to tariffs led to a 4% decline in its stock price. Target delivered disappointing results. Sales fell 2.8% in Q1, and it cut its full-year sales forecast to a low single-digit decline, citing weaker consumer spending and concern over tariffs. The stock fell more than 5% in response.

There were a few bright spots. Home Depot exceeded revenue expectations and maintained its profit forecast, supported by steady demand for home improvement. Executives said they would try not to raise prices despite the tariff pressures, although they cautioned that some low-margin imported items might be removed from shelves. Lowe’s also beat earnings expectations and reaffirmed its outlook, helping to minimize losses in its stock price.

In the tech sector, Nvidia and other AI-related stocks had been market leaders earlier in the month, with Nvidia’s stock climbing ahead of earnings on expectations of a 60% year-over-year revenue surge. However, these gains reversed later in the week amid broader risk-off sentiment. Chipmakers and cloud companies that had seen strong rallies experienced some profit-taking.

Other notable moves included Deckers Outdoor, which fell nearly 20% after it withdrew full-year guidance and warned of weaker sales due to tariff uncertainty. Meanwhile, Palo Alto Networks beat expectations but still saw its stock fall by about 7%, likely due to lofty investor expectations. UnitedHealth shares rose 8% on Monday after a sharp drop the previous week due to leadership changes and a DOJ probe. But by mid-week, the stock fell another 6% on renewed allegations of misconduct. These fluctuations highlight how sensitive markets remain to company-specific developments in the current environment. As earnings season winds down, broader macro drivers like trade policy and interest rates are returning to the forefront of investor focus.

Global Market Developments: Europe, Asia, and Commodities

U.S. policy decisions reverberated through global financial markets. European equities broke a six-week winning streak as Trump’s EU tariff threats roiled sentiment. The pan-European STOXX 600 index fell 0.9% on Friday, with the Eurozone’s blue-chip index down 1.5%. Germany’s DAX, which had recently approached record highs, was hit particularly hard. The UK’s FTSE 100 fared slightly better, supported by its newly signed trade agreement with the U.S., which offered protection from the looming tariffs.

European automakers, luxury brands, and technology exporters saw notable stock declines amid worries about lost access to U.S. markets. Bond yields in the region, which had risen earlier in the week following the UK’s inflation surprise, retreated later in the week as investors moved into safe havens.

In Asia, market performance was mixed. Chinese indices such as the Shanghai Composite and CSI300 posted modest moves as investors weighed weaker-than-expected retail sales and an ailing property sector against the hope of new policy support. Japan’s Nikkei index pulled back from recent highs after the disappointing GDP report and as the yen strengthened, dampening prospects for exporters.

Emerging markets also experienced turbulence mid-week when U.S. yields spiked, though conditions stabilized as yields eased later on.

Commodities reflected a tension between easing inflation and slowing growth. Oil prices remained subdued, with U.S. crude trading in the mid-$60s per barrel. Optimism about strong summer demand was tempered by concerns over China’s soft economic data and the risk of further trade conflicts. China’s April figures showed a drop in both oil refining and steel output, suggesting weakening demand. Industrial metals like copper and iron ore followed suit, slipping from recent highs amid fears the global manufacturing rebound could stall.

Precious metals, on the other hand, surged. Gold climbed past $3,200 per ounce, setting a new all-time high as investors flocked to safe-haven assets. The metal has posted double-digit gains this year, bolstered by a weaker dollar and global uncertainty.

In the cryptocurrency space, Bitcoin broke through the $100,000 mark and reached an all-time high near $110,000 mid-week, fueled by growing institutional interest and a supportive regulatory environment. However, the gains were volatile. Bitcoin fell sharply after hitting $109,900 but later rebounded. The movement also triggered rallies in related stocks, underscoring the asset class’s rising mainstream acceptance alongside its speculative nature.

Conclusion

In the past month, markets have faced a mix of constructive economic data and destabilizing policy shifts. U.S. inflation continued to trend lower, helping ease pressure on the Fed and boosting market optimism early in the week. Corporate earnings, especially in retail and tech, were mixed but generally solid enough to support equity markets.

However, by the end of the month, sentiment had turned more cautious. A shock uptick in UK inflation raised fresh concerns about global price stability, while a sudden reescalation in trade rhetoric from the U.S., this time targeting Europe, revived fears of a broader slowdown. These developments sent U.S. stocks and global indices lower, with bond markets swinging in response to a U.S. credit downgrade and safe-haven flows.

Amid these headwinds, gold surged and cryptocurrencies hit new highs, reflecting a defensive shift in investor positioning. In short, markets are navigating a fragile balance. While inflation is cooling and growth is holding up, policy volatility, whether fiscal or geopolitical, has the potential to shake confidence quickly. All eyes now turn to whether the latest round of trade tensions will escalate or be contained, as the answer will significantly influence global market direction heading into June.

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Spencer Li

A Deeper Look at the US-China Trade War & Possible Solutions

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The US–China trade war is often portrayed as a clash over tariffs or manufacturing jobs. But beneath the surface lies something far more intricate — a multidimensional struggle that spans economics, psychology, sociology, philosophy, history, and complex systems. It reflects not just a rivalry between two powers, but a confrontation between competing worldviews, power structures, and visions of the future.

In this post, I explore the trade war through six interdisciplinary lenses to unpack its true impact — and more importantly, to begin shaping a multi-faceted solution that moves beyond zero-sum thinking. Because in a deeply interconnected world, the cost of misreading complexity is not just economic — it’s civilizational.

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1. Economics – Geo-Economic Rivalry and Structural Disruption

a. Beyond Tariffs: Economic Statecraft

The trade war marks a shift from classic trade disputes to strategic geo-economics, where economic tools are weaponized to achieve geopolitical ends. This includes:

  • Export controls (e.g., semiconductors, AI chips)
  • Investment restrictions (e.g., outbound capital, blacklists)
  • Subsidy races (e.g., CHIPS Act vs. Made in China 2025)

It is no longer about “free trade vs. protectionism,” but about control over chokepoints in global value chains (e.g., TSMC, ASML) and securing economic sovereignty.

b. Decoupling and the Fracturing of Global Capital

China is engineering dual circulation (内循环 + 外循环), reducing reliance on Western export markets and technology. The US, in turn, is promoting “friendshoring” and reshoring, especially in critical industries like biotech, defense, and chips.

This transforms globalization’s logic from efficiency to resilience and political alignment — a paradigm shift with massive long-term cost implications.

c. Supply Chains as Strategic Terrain

Rather than tariffs, the real battleground is the architecture of global supply chains, especially:

  • Data and platform ecosystems
  • Clean energy tech (EVs, solar, batteries)
  • Rare earths and critical minerals

These are governed less by market logic and more by control, surveillance, and techno-industrial policy — where first-mover advantage is amplified by network effects and standard-setting power.

2. Psychology – Perception, Identity, and Miscalculation

a. Threat Perception and Cognitive Biases

  • US policymakers increasingly view China through the lens of realist threat inflation (e.g., China as a revisionist power).
  • Chinese elites perceive US moves as containment, reinforcing siege mentality and echoing historical humiliation narratives.

This creates a feedback loop of defensive aggression, where each side’s defensive actions are perceived as offensive escalation by the other — classic in conflict psychology.

b. Leadership Psychology

  • Trump’s framing of bilateral trade as a zero-sum deal and his aggressive, confrontational style polarized positions and heightened misperceptions.
  • Xi Jinping’s consolidation of power, elevation of nationalism, and ideological tightening have made policy more rigid and sensitive to perceived loss of face.

Both leaders anchored the dispute in their personal and national identities, making de-escalation politically costly.

c. Collective Cognitive Dissonance

Populations in both countries experience cognitive dissonance: Chinese citizens struggle to reconcile economic openness with nationalism; Americans feel betrayed by a system that exported their jobs and empowered a strategic rival.

This manifests in:

  • Scapegoating behavior
  • Black-and-white moral reasoning
  • Suppression of nuance in public discourse

3. Sociology – Power Structures, Class, and Social Reproduction

a. Class Dimensions of Trade Conflict

  • In the US, working-class discontent (driven by deindustrialization and wage stagnation) helped fuel Trump’s election and support for tariffs.
  • In China, state-managed capitalism shielded SOEs and elite firms, but rural and migrant workers bore the brunt of retaliatory job losses.

The trade war, therefore, reflects underlying social contract tensions within both systems:

  • The US faces populist backlash against global capitalism.
  • China navigates legitimacy through growth amid demographic and employment pressures.

b. Institutional Mediation and Propaganda

  • US institutions (Congress, media, think tanks) tend to fragment and politicize narratives, reducing coherent long-term strategy.
  • China’s centralized structure allows unified messaging, but limits policy flexibility due to internal surveillance and political conformity.

Propaganda plays different roles: in the US as ideological polarization, in China as state-driven cohesion.

c. Norm Shifts and New Coalitions

We’re witnessing new global social alignments:

  • Global South alignment with China (e.g., Belt & Road, BRICS+)
  • Western re-industrialization coalitions (e.g., EU–US on chips)

This reflects a reorganization of global class structures along civilizational and technological lines.

4. Philosophy – Worldviews, Ethics, and Ontology of Power

a. Ontological Conflict: What is the Good Life?

The trade war is a surface expression of deeper value conflicts:

  • US worldview: liberal individualism, market rule of law, open innovation.
  • Chinese worldview: Confucian statist meritocracy, stability through hierarchy, techno-political unity.

This reflects not just policy divergence, but ontological divergence — what constitutes legitimacy, truth, and a well-functioning society.

b. Justice and Moral Economy

  • Is the protection of domestic workers a moral duty, even at the cost of global efficiency?
  • Can economic development under authoritarian regimes be morally legitimate, if it lifts millions from poverty?

Both sides use moral rhetoric, but often conceal underlying power interests.

c. Foucault and Soft Power Discipline

The trade war is not just about physical goods, but also norm production — who gets to define:

  • Intellectual property rights
  • Cybersecurity standards
  • Human rights benchmarks

The conflict reflects a deeper battle over normative power and the global epistemic order, echoing Foucault’s view that power is exerted through the definition of truth itself.

5. History – Cycles, Memory, and Hegemonic Transition

a. Thucydides Trap: Myth or Pattern?

The idea that rising powers inevitably clash with established powers (Graham Allison’s “Thucydides Trap”) is widely cited — but risks self-fulfilling prophecy if not critically examined.

Historical transitions (UK–US, US–USSR, Sparta–Athens) show:

  • Power transitions need not lead to war, but mismanaged perception and rigid alliances increase danger.

b. The Century of Humiliation and Postwar Hegemony

  • China’s trauma from Western imperialism (1839–1949) drives its resentment of Western-led order.
  • The US, architect of post-WWII institutions (Bretton Woods, WTO), sees challenges to these as threats to global stability and moral leadership.

Historical memory shapes policy in deeply emotional ways.

c. Empire Decline and Peripheral Turbulence

As US hegemonic power wanes, peripheral regions (e.g., Taiwan, South China Sea, Central Asia) become flashpoints, echoing late-stage empire patterns (e.g., British Empire’s post-war unraveling).

History does not repeat, but it rhymes in patterns of decline, overreach, and backlash.

6. Systems Thinking – Complexity, Feedback Loops, and Emergence

a. Decoupling as Systemic Rewiring

The global economy is being restructured into semi-independent spheres:

  • US-led: democratic allies, IP-centric, dollar-based.
  • China-led: resource-rich partners, infrastructure-based, digital yuan experiments.

Decoupling isn’t total — but partial decoupling creates:

  • Systemic duplication (two 5G standards, two payment rails)
  • Higher transaction costs
  • Increased fragility at the intersystem interfaces

b. Second- and Third-Order Effects

First-order effects (tariffs) are easy to see. But second- and third-order effects include:

  • Techno-nationalism escalation → arms race in quantum, biotech
  • Climate cooperation breakdown → higher planetary risk
  • Global South re-alignment → new geopolitical fault lines

Small shifts in leverage points (e.g., banning one chip type) can cascade through multiple systems — financial, environmental, diplomatic.

c. Meta-Crisis and Bifurcation

We may be entering a meta-crisis zone, where multiple systemic stressors (trade, climate, AI risk, demographic aging) interact and create phase shifts.

Systems analysis suggests:

  • Leverage lies in norms, trust, and shared governance models
  • Emergence of a new order is more likely than restoration of the old

Is there Any Solution to This?

The US–China trade war is not merely a dispute over trade deficits or national pride. It is a crucible where our deepest assumptions about progress, power, and prosperity are being tested. As we peel back the layers, we begin to see how economic decisions ripple into psychological narratives, how sociopolitical tensions reinforce historical traumas, and how the global systems we inhabit can either spiral toward fragmentation — or be reimagined into something more cooperative and resilient.

This is not just a geopolitical standoff; it is a moment of systemic reckoning. Beneath the tariffs and tech bans lies a larger question:

Can two fundamentally different civilizations find a way to coexist, compete, and collaborate in a multipolar world without collapsing into mutual destruction?

A meaningful path forward demands more than reactive policy or zero-sum logic. It requires cognitive flexibility, moral imagination, and a renewed commitment to shared norms. No single discipline — whether economics, international relations, or security — can untangle this web alone. But integrated thinking across lenses offers fertile ground for solutions.

Multi-Faceted Solutions

Any long-lasting solution has to be multi-facted in nature, and take into consideration various perspectives. Here are some possibilities:

  • Economic Realignment with Safeguards:
    Develop bilateral and multilateral mechanisms that allow selective decoupling in sensitive sectors (e.g., defense, critical tech) while preserving interdependence in global commons (e.g., climate, public health, financial stability). This balances national security with global cooperation.
  • Norm-Based Tech Governance:
    Create transnational frameworks for tech standards, AI safety, cybersecurity, and intellectual property rights — not controlled by one bloc, but co-designed by a coalition of stakeholders including the Global South. This prevents techno-colonialism while allowing ethical innovation.
  • Psychological De-escalation through Narrative Shifts:
    Encourage a shift in political and media narratives from confrontation to constructive competition. Mutual acknowledgment of grievances (e.g., historical trauma, economic dislocation) can foster empathy and reduce zero-sum threat perception.
  • Institutional Reform for Resilience:
    Support global institutions (e.g., WTO, IMF, UN bodies) to evolve beyond post-WWII structures, incorporating new voices and adapting to decentralized power dynamics. Trust must be rebuilt through transparency, inclusivity, and enforcement mechanisms that work.
  • Civilizational Dialogue, Not Just Diplomacy:
    Establish cultural and academic exchanges that deepen understanding of divergent worldviews — liberal individualism vs. collectivist meritocracy, Western vs. Eastern ethics. Such ontological dialogue may open imaginative possibilities where policy has stalled.
  • Systems-Level Risk Mitigation:
    Recognize the meta-crisis of overlapping fragilities — climate change, aging populations, tech disruption, inequality — and treat the trade war as one expression of broader systemic stress. Cross-sector coordination and anticipatory governance are key.

Concluding Thoughts

If we fail to take a multi-dimensional approach, we risk entrenching the very divisions we seek to overcome. But if we engage across disciplines, histories, and cultures — not to impose dominance, but to negotiate coexistence — then the trade war may yet be transformed from a symbol of breakdown into a catalyst for renewal.

To reflect further, consider:

  • What would a “win-win” outcome look like in a world where both powers define success so differently?
  • Are we building economic systems to serve people — or asking people to serve systems?
  • If the next global order emerges from this conflict, what values do we want it to be built upon?

Let me know your answers in the comments below!

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Spencer Li

Best Assets to Invest in Under President Donald Trump

donald trump wins

donald trump wins

The U.S. presidential election results for 2024 are in, and Donald Trump has won his second term. The Republicans not only secured the White House but also gained control of the Senate, and potentially the House of Representatives, though this is yet to be confirmed.

This powerful combination places Trump in one of the strongest positions a U.S. president has held in modern history, giving him significant latitude to pursue his agenda without as many checks from Congress, at least until the 2026 midterm elections.

This outcome has far-reaching implications for investors in 2025, given the policies Trump is likely to pursue, from aggressive fiscal spending to potential tariffs on international trade partners.

In this post, we will explore how various asset classes performed during Trump’s first presidency, examine key changes in the economic landscape, and provide insights on the best assets to hold in the current environment.

 

How Did Various Asset Classes Fare During Trump’s Last Presidency?

Under Trump’s first term (2017-2021), financial markets were largely favorable to equities, especially those in sectors directly impacted by his policies. Here’s a quick look at how key asset classes and sectors performed:

  1. Equities: Stock markets surged, with the Dow Jones Industrial Average gaining 56% over Trump’s term, an impressive annualized return of around 11.8%. Corporate tax cuts were a significant factor, boosting the profitability of many companies. Technology, financial, and defense stocks performed particularly well, as they benefited from both tax incentives and a reduction in regulatory burdens.
  2. Energy Sector: Despite policy support for fossil fuels, the energy sector saw mixed results due to global oil price volatility and competition from renewable energy. Nevertheless, Trump’s pro-oil policies did offer some support to traditional energy players like ExxonMobil (XOM) and Chevron (CVX).
  3. Real Estate: Real estate assets saw positive gains during Trump’s first term, especially as interest rates remained relatively low, fostering demand for property investments.
  4. Gold and Commodities: Gold benefited as a safe-haven asset, especially during periods of geopolitical tension. Other commodities also showed resilience, especially those with inelastic demand.
  5. Cryptocurrencies: Cryptocurrencies gained traction as decentralized assets, independent of government intervention. Bitcoin, in particular, hit new highs toward the end of Trump’s term, and it continues to attract attention as a potential hedge against inflation and economic uncertainty.

What’s Different This Time?

While Trump’s new term brings some policy continuity, the macroeconomic landscape in 2025 is very different from 2017. Here are some major changes:

  1. Post-Pandemic Recovery: The global economy is still adjusting from the aftereffects of the COVID-19 pandemic. Supply chain challenges, labor shortages, and rising production costs have reshaped economic dynamics, influencing inflation and wage levels.
  2. Elevated National Debt: The U.S. debt has continued to grow, posing additional challenges for fiscal policy. Trump’s potential push for tax cuts and increased fiscal spending may lead to more borrowing, which could heighten the risk of inflationary pressures and increase long-term interest rates.
  3. Geopolitical Tensions: Tensions with China persist, and the ongoing conflict between Russia and Ukraine has added complexity to global trade and energy markets. Trump’s policies could reignite trade conflicts, though he may seek to negotiate deals to benefit U.S. interests.
  4. Federal Reserve Policy: The Federal Reserve has already started cutting interest rates, with more reductions projected over the next few months. This accommodative stance aims to stimulate economic growth but may fuel inflationary pressures, especially if paired with fiscal expansion.

Will Inflation Return in 2025?

Inflation is a key concern heading into 2025, and Trump’s policies could amplify it. His America-first approach often includes:

  • Large Fiscal Spending: Infrastructure projects and defense spending could drive up government expenditures.
  • Lower Taxes: Reduced taxes can increase disposable income, but they also expand the federal deficit.
  • Potential Tariffs: Trade tariffs may raise prices on imported goods, adding to inflationary pressures.

The Fed’s recent rate cuts, aimed at stimulating the economy, could further heighten inflationary risks if demand outpaces supply. Although inflation has eased recently, these combined factors make a resurgence in 2025 likely.

One scenario is that the Fed may allow nominal GDP to grow faster than inflation, helping to reduce the real burden of national debt. However, this approach risks a “Liz Truss moment” if investors lose confidence in the U.S.’s fiscal management, causing bond yields to spike and leading to market instability.

Will There Be a Recession or Market Crash?

The question of a potential recession or market crash depends on the balance between economic growth and inflation control.

Trump’s pro-growth policies, such as tax cuts and deregulation, could stimulate economic expansion.

However, unchecked spending and low interest rates might lead to overheating, which could result in a subsequent downturn.

If the Fed is forced to raise interest rates abruptly in response to rising inflation, the risk of a recession or market crash increases.

Similarly, geopolitical instability or an unforeseen financial crisis could trigger volatility.

Investors should be cautious of high debt levels and be prepared for potential shocks to the system.

Best Assets to Invest in Under President Trump’s New Term

With the potential for inflationary pressures, fiscal stimulus, and geopolitical shifts, the following assets and sectors could present valuable opportunities for investors. Here’s a deeper look at each category:

a) Hard Assets (Gold, Commodities, Real Estate)

Gold and Commodities:
Gold has historically served as a hedge against inflation and currency devaluation, making it an appealing choice in a Trump administration likely to encourage inflationary spending. Trump’s fiscal policies—especially increased government spending on infrastructure, defense, and subsidies—could stimulate inflation, which would enhance gold’s value as a safe-haven asset.

Commodities, including oil, natural gas, and agricultural products, are also likely to benefit. These hard assets have intrinsic value and limited supply, making them resilient in inflationary climates. For example, with potential tariffs on imported goods and raw materials, domestic agricultural and industrial commodities could experience price gains due to limited supply chains.

Real Estate:
Real estate can offer stability in an inflationary environment, as property values and rental income generally rise with inflation. Investors in prime real estate may benefit from demand-driven rental increases. However, for those investing in Real Estate Investment Trusts (REITs), it’s essential to be mindful of volatility driven by interest rate fluctuations. REIT prices tend to decline when long-term interest rates rise, as higher yields on bonds and other fixed-income investments become more attractive in comparison.

b) Cryptocurrencies (Bitcoin, Ethereum)

Bitcoin and Ethereum:
Cryptocurrencies like Bitcoin and Ethereum are increasingly regarded as “digital gold” due to their decentralized nature and scarcity. In an era where fiscal expansion and debt accumulation might undermine traditional fiat currencies, Bitcoin, in particular, stands out as an alternative store of value. Investors may flock to Bitcoin and other cryptocurrencies as hedges against inflation, seeking assets uncorrelated to traditional financial markets.

Crypto Mining Companies:
With the potential rise in demand for digital assets, crypto mining companies, such as Marathon Digital (MARA) and Riot Platforms (RIOT), are well-positioned to benefit. These companies mine Bitcoin and other cryptocurrencies, and they often see their stock prices rise alongside cryptocurrency prices. Increased regulatory support or at least a hands-off approach to the crypto sector from the Trump administration could further drive growth for these companies.

c) Conventional Energy (Oil and Gas Stocks)

Oil and Gas Companies:
Trump’s administration has historically supported traditional energy industries, often rolling back environmental regulations and promoting fossil fuel production. This favorable policy environment could benefit companies like ExxonMobil (XOM), Chevron (CVX), and Occidental Petroleum (OXY), which could see profitability increases if oil prices rise due to heightened demand and reduced regulatory costs.

However, investors should keep an eye on the global shift toward renewable energy. The growth of green energy and global commitments to reduce carbon emissions could temper the growth potential for oil and gas companies in the longer term. While Trump’s policies may provide a short-term boost, a diversified approach within the energy sector—including a mix of conventional and renewable energy investments—could offer a more balanced risk profile.

d) Financials

Banks and Financial Institutions:
Banks such as JPMorgan Chase (JPM), Bank of America (BAC), and Wells Fargo (WFC) could benefit from Trump’s potential deregulation initiatives. Deregulation could reduce compliance costs, streamline operations, and allow banks to take on more leverage, potentially increasing profitability. Additionally, Trump’s policies may stimulate economic activity, which could lead to higher demand for loans, further boosting bank earnings.

Moreover, if inflation rises, the Federal Reserve may eventually raise interest rates, benefiting banks by widening their net interest margins (the difference between the interest banks earn on loans and the interest they pay on deposits). This would be especially favorable for large banks with extensive lending operations.

e) Industrials and Defense Stocks

Infrastructure and Defense Companies:
Industrials, especially companies involved in infrastructure, may see increased opportunities. Trump has shown a strong preference for infrastructure spending, which may drive demand for companies like Caterpillar (CAT) that provide construction machinery and equipment. Infrastructure development would likely receive a fiscal boost, creating growth prospects for industrial firms that support public works, transportation, and urban development projects.

Defense Contractors:
Defense spending may also increase under Trump’s administration, benefiting companies such as Lockheed Martin, Northrop Grumman, and General Dynamics. Trump’s commitment to a strong national defense and bolstered military spending could create a favorable environment for these firms, which manufacture advanced defense technologies and equipment for the U.S. government and its allies.

f) Technology Stocks

Large-Cap Technology Companies:
Despite Trump’s previous criticisms of certain tech giants, the technology sector remains a cornerstone of the U.S. economy and a key driver of innovation and growth. Companies with strong pricing power, established market positions, and diversified revenue streams—such as Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGL)—are better positioned to withstand inflationary pressures.

The sector may face some challenges if Trump imposes new tariffs on tech components imported from China. This could raise costs for companies heavily dependent on international supply chains. However, companies with the ability to innovate, shift production, or pass costs to consumers are likely to fare well.

High-Growth and Emerging Tech:
Additionally, emerging sectors like artificial intelligence (AI), cybersecurity, and cloud computing could continue to thrive, driven by growing demand for digital transformation and data protection. Investors seeking exposure to long-term growth should consider companies in these high-potential segments of the technology market.

g) Agricultural Stocks

Agricultural and Farming Companies:
Agriculture is a key sector in Trump’s “America First” agenda, and companies like Deere & Co. (DE) and Tractor Supply (TSCO) may benefit from increased support for U.S. farmers and agricultural exports. With Trump’s history of trade tariffs, there could be renewed focus on boosting domestic agricultural production, making these companies appealing for investors.

Agricultural support could include subsidies, tax relief, or other forms of assistance, which would improve the profitability of firms focused on farming equipment, crop production, and rural infrastructure. Additionally, if inflation drives up commodity prices, agricultural companies may benefit from increased crop prices and demand for machinery and equipment.

Conclusion

President Trump’s return to the White House brings with it a unique set of challenges and opportunities for investors. Inflationary pressures appear likely, driven by fiscal spending, tax cuts, and an accommodative Fed policy. While the potential for a recession or market instability exists, especially if inflation runs too hot, there are asset classes that could thrive in this environment.

For retail investors, a balanced approach focusing on hard assets, energy, financials, and select technology and industrial stocks may offer resilience and growth. Cryptocurrencies like Bitcoin and gold can provide inflation protection, while traditional energy and financials benefit from Trump’s pro-business policies. Investors should remain adaptable and informed, monitoring developments closely to make adjustments as needed.

As 2025 unfolds, the financial landscape may shift quickly. Staying diversified and vigilant, while being responsive to policy changes, can help navigate the complexities of investing under President Trump’s new administration.

As we come to the end of the blog post, here are some questions for you to ponder about:

  • How much risk are you willing to take on in pursuit of growth, and are you prepared to adjust your portfolio if inflation spirals or markets turn volatile?
  • With the shifting economic landscape, is it more important to focus on traditional hard assets for stability or to embrace emerging sectors like crypto and tech for potential high returns?
  • How might your investment strategy change if Trump’s policies face strong resistance or if unexpected geopolitical events reshape the economic outlook?

Let me know your answers in the comments below!

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Spencer Li

The 2024 U.S. Presidential Election: What to Buy if Donald Trump or Kamala Harris Wins?

Trump and Harris

The upcoming U.S. presidential election, set for November 5, 2024, is expected to have profound implications for the economy and financial markets.

The race, featuring Donald Trump for the Republican Party and Kamala Harris for the Democratic Party, has investors closely watching each candidate’s policy stance, as their win could influence tax rates, regulatory landscapes, and fiscal policies.

In this post, we’ll explore historical election impacts, candidate profiles, winning odds, and the asset classes that may benefit under each candidate’s leadership.

 

Historical Impact of Elections on Financial Markets

Historically, U.S. presidential elections bring about market volatility and, in some cases, long-lasting shifts in market sentiment.

The stock market tends to perform differently based on the winning party and the subsequent policy shifts.

  • 2008 Election (Obama vs. McCain): The financial crisis heavily influenced the 2008 election, and Obama’s win led to mixed reactions in the short term. However, his administration’s introduction of stimulus packages helped stabilize the economy, and the S&P 500 experienced a steady climb over the next several years.
  • 2016 Election (Trump vs. Clinton): The unexpected Trump victory led to a rapid market rally. Known as the “Trump Rally,” the S&P 500 surged by approximately 25% in the following year, fueled by pro-business policies, tax cuts, and deregulation.
  • 2020 Election (Biden vs. Trump): Amid the pandemic, Biden’s focus on infrastructure and renewable energy investment gave certain sectors a boost. However, his administration’s regulatory approach in technology and energy sectors introduced some volatility.

Data shows that markets often exhibit volatility before and after election days, with equities tending to recover and stabilize once results are confirmed.

When the incumbent party wins, markets generally rally, while a change in power brings a cautious approach from investors.

Brief Background of Each Candidate and Their Key Policies


Donald Trump (Republican):

  • Background: Former President Donald Trump previously served from 2017 to 2021. Known for his business-first approach, he has emphasized economic growth through deregulation, tax cuts, and “America First” trade policies.
  • Key Policies:
    • Energy: Favors traditional energy sources, aiming to support oil, natural gas, and coal industries through deregulation.
    • Defense and National Security: Advocates for increased military spending and a robust national security framework.
    • Deregulation and Tax Cuts: Prioritizes corporate tax cuts and reduced regulatory burdens on businesses, particularly in finance and real estate.
    • Trade Policy: Emphasizes protectionism, with a strong stance on tariffs, especially regarding U.S.-China trade.

Kamala Harris (Democrat):

  • Background: Vice President Kamala Harris has a background in law and has supported progressive initiatives, including healthcare expansion, renewable energy investment, and climate-friendly infrastructure projects.
  • Key Policies:
    • Climate and Green Energy: Aims to increase investments in renewable energy, with incentives for solar, wind, and clean technologies.
    • Healthcare Access: Supports expanding healthcare access and reducing healthcare costs, including potential drug pricing reforms.
    • Infrastructure: Advocates for sustainable infrastructure, focusing on green construction and modernization of public transportation.
    • Technology and Innovation: Promotes tech innovation, cybersecurity, and digital access, along with a stronger regulatory framework for tech giants.

Odds of Each Candidate Winning

This election is shaping up to be one of the tightest races in recent history, with official polls indicating a neck-and-neck competition between Kamala Harris and Donald Trump. While traditional polls suggest a close contest, Trump and his supporters have pointed to alternative sources—particularly betting markets—that project him as the frontrunner. Trump recently cited these “gambling polls,” claiming they show him with a substantial lead, even stating figures like 65% to 35% in his favor at a campaign event.

Several popular betting platforms indeed reflect this sentiment. As of recent data:

  • Polymarket, a prominent election betting service, currently puts Trump’s chances of winning at 67% and Harris’s at 33%.
  • Kalshi, another major platform, shows similar odds, giving Trump 62% and Harris 38%.

With trust in traditional media and polling declining, betting platforms have gained traction as alternative “predictive” tools, with some public figures, including Elon Musk, suggesting that these markets might be more reliable indicators. Unlike poll respondents who often answer based on preference, those betting on outcomes are motivated by profit and thus tend to focus on who they think will actually win rather than who they hope will prevail.

Betting Market Trends and Potential Biases: Interest in betting on the 2024 election is reportedly higher than ever, driven by the widespread legalization of sports betting and recent legal victories for platforms like Kalshi. Some, however, have raised concerns over the potential for market manipulation. Reports indicate that a single French national placed roughly $28 million worth of bets on Trump across four accounts on Polymarket. Although this activity has been labeled as “personal views” rather than manipulation, the absence of strict betting limits could allow wealthy individuals to skew the odds in favor of their preferred candidate.

Regulatory Scrutiny: The rise of election betting has not gone unnoticed by regulators. The Commodity Futures Trading Commission (CFTC) has attempted to shut down or restrict several platforms, citing concerns over unregulated political betting markets. However, Kalshi recently won a legal battle that permits it to take U.S. bets on election outcomes, a ruling that may pave the way for further growth in election betting.

While official polls continue to portray a tight race, betting markets currently lean toward Trump as the favorite, with Trump’s campaign embracing this narrative. As betting markets and traditional polls offer differing views, investors and observers remain divided on which source may ultimately prove more predictive.

Screenshot 2024 11 02 003209

Asset Classes Likely to Benefit if Each Candidate Wins


If Donald Trump Wins:

  • Energy and Fossil Fuels: Trump’s support for traditional energy likely favors oil, gas, and coal sectors. Investors may gain exposure through ETFs like XLE (Energy Select Sector SPDR), which holds major oil and gas companies.
  • Defense and Aerospace: Increased defense spending would benefit aerospace and defense contractors such as Lockheed Martin and Raytheon. ETFs like ITA (iShares U.S. Aerospace & Defense ETF) could offer broad sector exposure.
  • Financial Services: With Trump’s pro-deregulation stance, large financial institutions may see increased profitability. ETFs like XLF (Financial Select Sector SPDR) and KBWB (Invesco KBW Bank ETF) offer access to major banks and financial stocks.
  • Real Estate and Infrastructure: Real Estate Investment Trusts (REITs) may benefit from favorable tax policies. Look into REIT-focused ETFs like VNQ (Vanguard Real Estate ETF) for broader exposure, particularly in commercial real estate.
  • Industrial Metals: A continuation of protectionist policies could favor domestic steel and aluminum producers. Consider SLX (VanEck Vectors Steel ETF) to gain exposure to steel companies that would benefit from tariffs and support for heavy industry.

If Kamala Harris Wins:

  • Renewable Energy and ESG Investments: Harris’s focus on green energy would likely boost clean energy companies. ETFs like ICLN (iShares Global Clean Energy ETF) or TAN (Invesco Solar ETF) offer direct exposure to renewable energy stocks.
  • Healthcare and Biotechnology: Harris’s stance on healthcare access could benefit managed care providers and biotech firms focused on affordable healthcare. XLV (Health Care Select Sector SPDR) and IBB (iShares Nasdaq Biotechnology ETF) are options for healthcare exposure.
  • Green Infrastructure: Companies involved in eco-friendly construction and infrastructure may gain from Harris’s policies. Infrastructure ETFs like PAVE (Global X U.S. Infrastructure Development ETF) could be a way to access companies expected to benefit from sustainable projects.
  • Technology and Innovation: Increased emphasis on tech infrastructure, 5G, and cybersecurity may support growth for technology companies. QQQ (Invesco QQQ ETF) provides exposure to the Nasdaq 100, with high concentrations in tech firms.
  • Commodities for Green Tech: Harris’s renewable push would increase demand for lithium, copper, and other materials used in green technologies. LIT (Global X Lithium & Battery Tech ETF) offers exposure to lithium and battery producers, while COPX (Global X Copper Miners ETF) focuses on copper.

Conclusion: Navigating Election-Driven Market Changes

The 2024 election could steer financial markets in distinct directions based on the victor’s policy focus.

Trump’s administration would likely prioritize traditional industries and a deregulated business environment, benefiting sectors like fossil fuels, defense, and financials.

Harris’s administration, on the other hand, would champion renewable energy, healthcare reform, and sustainable infrastructure, presenting opportunities in clean energy, ESG investments, and green technologies.

For investors, understanding these dynamics can inform strategic portfolio adjustments ahead of the election.

While each candidate’s policies may initially drive market volatility, focusing on diversified asset exposure aligned with either candidate’s strengths can help manage risks and capitalize on opportunities in a changing economic landscape.

As we come to the end of the blog post, here are some questions to ponder about:

  • How much weight should investors place on betting markets compared to traditional polls, and could this shift signal a broader change in how we interpret political forecasts?
  • In an era of increasing political polarization, how can investors best prepare for the potential market volatility and policy swings that come with close and contentious elections?
  • With significant differences in each candidate’s approach to key issues like energy, technology, and healthcare, how might this election reshape America’s economic priorities—and what could this mean for the future of sustainable and responsible investing?

Let me know your answers in the comments below!

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