I wonder if the new political uncertainty in the USA is already priced in.
Both the S&P 500 and the Nasdaq 100 are at an all-time high.
Surprising, considering the new administration seems to shake up the US in a big way. Could go right, could go wrong - but shouldn't the uncertainty alone already devalue the US stock market?
Not to mention Germany's in a third consecutive year of economic recession and facing an election were the extreme right is sure to make big gains (again). Government policy has already taken a sharp-right turn (which is not good for the economy) and it's likely to do so again after the elections. It's close to being in the same situation as Russia was in 2022, where war would actually help it's economy. Frankly the population has turned every more to the right for a decade now.
UK ... well, there's the Brexit mess, and UK MAY be exiting a 1.5 year long recession (numbers "look good", in the sense that it's no longer getting worse, but a serious hickup can still make this a 2 year long recession)
France was pretty close to an extreme-right takeover (which was entirely Macron's fault, with his "elect either me or Le Hitler" ploy that he has used 4 times now and every time he uses it, it gets Le Pen closer to the presidency), and has taken a hard-right turn in policies. In this environment, parliament kicked out the government and, frankly, they're being SO stupid that it actually makes Macron look good. However, it is at least not in recession, but it's certainly going through a deep downturn.
Italy WAS taken over by the extreme-right, and has been in a crisis for decades (also before Meloni, she's a symptom, not a cause. Also not making things better).
Poland is an actual bona fide bright spot in this environment.
Spain, Portugal, Greece, Romania, Hungary ... are not.
Then there's Ukraine ... whilst perhaps not directly disrupting Western European economies, it's certainly not a positive. War, maybe constant war, has now returned to Europe. And of course, Kosovo recently felt the need to remind everyone that though the war ended, things are not resolved. And in Georgia, and the Baltic states, as well as the Polish border and Finland Putin is reminding everyone that he won't be done after the Ukraine war.
Meanwhile the EU itself seems to be disintegrating. Frankly EU cohesion has taken a sharp downturn since the EU constitution disaster. Even the Shengen treaty is falling apart. It is also making a sharp right turn and now you can find headlines that "the EU commission is turning authoritarian".
Makes you think that one, most European politicians are seriously denying economic reality ... and second maybe that the rise of the right and the failure of economic policy in the last decade is not a coincidence.
The uncertainty is there, for sure. Just look at the index YTD and then consider that the AI hype is in full swing and that Trump promises huge tax cuts to business. Stocks should be soaring but looks like not everyone buys the story.
It’s hard to price in an unknown quantity though. If the war in Europe spreads, who knows what happens? If Trump chokes on some novichok of just gives out from all the hard grifting he’s done all his life, who knows?
That assumes that the corporations would be on the wrong side of the uncertainty.
To me, it seems that the political environment in the US is the most corporate
-friendly it’s maybe ever been, so maybe the market priced that in but for the other direction.
Which concrete corporate-friendly actions have taken place?
Just a few examples: A number of environmental regulations have been, or are in the process of being rolled back. There's pledges in Washington to open up more land for mineral exploration. "Drill, baby drill" is back in fashion. Lots of politicians talking about selling off millions of acres of BLM land for private development. Talk in Washington about selling off public land that was recently made into national monuments.
There are literally hundreds more.
If you haven't seen any, you haven't tried. It's not even every day. It's almost every hour.
As a PhD new graduate, industry is a far better place than academia under this current government. Academia is suffering heavily from the funding cuts.
To me, it seems that the political environment in the US is the most corporate -friendly it’s maybe ever been
I agree with this notion. Which is why it's so strange to see so many very large companies shedding thousands of employees right now.
Chevron: 2,000
Southwest Airlines: 1,500
Those two just off the top of my head, but there have been more recently.
I know that there is an adage that "Wall Street hates uncertainty," but I feel like some businesspeople in very high places are very worried about the near future.
IMHO the only way the markets make sense is that investors fear inflation more than they do uncertainty. I don't personally understand how anything is priced anymore.
I'm not sure the levels of the S&P and Nasdaq are priced in a sophisticated way. Prices are set by the largest buyers and seller which in this case is the US public buying in either directly or via pension funds and the like.
The public fund buying has been ~50bn / month which is considerably more than people like Buffett's selling.
"Berkshire would not have achieved its results in any locale except America whereas America would have been every bit the success it has been if Berkshire had never existed."
-- https://www.berkshirehathaway.com/letters/2024ltr.pdf
Not just a great investor, Buffet is a great man. Not many "self-made" billionaires think like that.
If Warren Buffet believes people with the "short straw" need help, why doesn't he just give away his money to individual people in less comfortable circumstances?
Edit: I'm not talking about "forming a charity". I'm talking about just giving actual money to actual individuals.
Leading Democrats seem to hate taxes as much as anybody. ( One of the Biden family’s legal troubles was tax evasion. ). Celebrity mouthpieces from Hollywood are known to take measures to minimize taxes, I.e. Bruce Springsteen calling his mansion a tomato farm. Pols themselves jump through hoops like John Kerry parking his yacht across state lines to minimize taxes.
I don’t see much practical difference in behaviors, really.
There's a difference between taking action to minimize your personal taxes and taking action to shape overall tax policy. The examples you give are the former.
On the policy side, while it's true that both parties have been reluctant to raise taxes, I think it's clear that since the Reagan era, it's Republicans who have moved most aggressively to lower taxes, and in ways that disproportionately lower the taxes of the wealthy.
I'm pretty sure he's doing that. The problem is that if you were to give away all your money and the underlying system that creates poor people doesn't change, well, then giving away all your money is noble but kinda pointless since there will always be a next batch of poor people who need help.
I don't see that the stuff he's given his money to (e.g., the Gates Foundation) is really doing much to change that underlying system. On the contrary, it's all working comfortably within that system.
> why doesn't he just give away his money to individual people in less comfortable circumstances?
Because he is advocating systemic changes.
He may very well also give money away to people in need (it seems he does), but this would not actually address the issues he is alluding to here since it would not change the system. Hence there is no value for him to bring it up here.
>why doesn't he just give away his money to individual people in less comfortable circumstances?
How many people are there in less comfortable circumstances? 100m? 1bn? Buffett personally doesn't have the time to go handing money to everyone.
He is, probably sensibly, a believer in the conventional system in functional countries - taxes get paid to the government which then has policies to help the less well off.
For instance, not just make offhand comments about taxation, but form a political group that pushes for higher taxes the same way other shadowy political groups push against them.
32 comments
[ 5.2 ms ] story [ 78.0 ms ] threadBoth the S&P 500 and the Nasdaq 100 are at an all-time high.
Surprising, considering the new administration seems to shake up the US in a big way. Could go right, could go wrong - but shouldn't the uncertainty alone already devalue the US stock market?
UK ... well, there's the Brexit mess, and UK MAY be exiting a 1.5 year long recession (numbers "look good", in the sense that it's no longer getting worse, but a serious hickup can still make this a 2 year long recession)
France was pretty close to an extreme-right takeover (which was entirely Macron's fault, with his "elect either me or Le Hitler" ploy that he has used 4 times now and every time he uses it, it gets Le Pen closer to the presidency), and has taken a hard-right turn in policies. In this environment, parliament kicked out the government and, frankly, they're being SO stupid that it actually makes Macron look good. However, it is at least not in recession, but it's certainly going through a deep downturn.
Italy WAS taken over by the extreme-right, and has been in a crisis for decades (also before Meloni, she's a symptom, not a cause. Also not making things better).
Poland is an actual bona fide bright spot in this environment.
Spain, Portugal, Greece, Romania, Hungary ... are not.
Then there's Ukraine ... whilst perhaps not directly disrupting Western European economies, it's certainly not a positive. War, maybe constant war, has now returned to Europe. And of course, Kosovo recently felt the need to remind everyone that though the war ended, things are not resolved. And in Georgia, and the Baltic states, as well as the Polish border and Finland Putin is reminding everyone that he won't be done after the Ukraine war.
Meanwhile the EU itself seems to be disintegrating. Frankly EU cohesion has taken a sharp downturn since the EU constitution disaster. Even the Shengen treaty is falling apart. It is also making a sharp right turn and now you can find headlines that "the EU commission is turning authoritarian".
Makes you think that one, most European politicians are seriously denying economic reality ... and second maybe that the rise of the right and the failure of economic policy in the last decade is not a coincidence.
It’s hard to price in an unknown quantity though. If the war in Europe spreads, who knows what happens? If Trump chokes on some novichok of just gives out from all the hard grifting he’s done all his life, who knows?
I think a more interesting measure is looking at indicies since the change in leadership.
They all went up at the beginning of the term, but have fallen back to just below where they started.To me, it seems that the political environment in the US is the most corporate -friendly it’s maybe ever been, so maybe the market priced that in but for the other direction.
All of the Magnificent 7 have kissed the ring and paid their indulgence, earning unlimited favor.
The federal agencies are being gutted left and right, regulations, where they still exist, have no one to enforce them.
Just a few examples: A number of environmental regulations have been, or are in the process of being rolled back. There's pledges in Washington to open up more land for mineral exploration. "Drill, baby drill" is back in fashion. Lots of politicians talking about selling off millions of acres of BLM land for private development. Talk in Washington about selling off public land that was recently made into national monuments.
There are literally hundreds more.
If you haven't seen any, you haven't tried. It's not even every day. It's almost every hour.
I agree with this notion. Which is why it's so strange to see so many very large companies shedding thousands of employees right now.
Those two just off the top of my head, but there have been more recently.I know that there is an adage that "Wall Street hates uncertainty," but I feel like some businesspeople in very high places are very worried about the near future.
The public fund buying has been ~50bn / month which is considerably more than people like Buffett's selling.
The market is on the high side by most metrics, see eg. https://www.currentmarketvaluation.com/
Not just a great investor, Buffet is a great man. Not many "self-made" billionaires think like that.
Edit: I'm not talking about "forming a charity". I'm talking about just giving actual money to actual individuals.
Leading Democrats seem to hate taxes as much as anybody. ( One of the Biden family’s legal troubles was tax evasion. ). Celebrity mouthpieces from Hollywood are known to take measures to minimize taxes, I.e. Bruce Springsteen calling his mansion a tomato farm. Pols themselves jump through hoops like John Kerry parking his yacht across state lines to minimize taxes.
I don’t see much practical difference in behaviors, really.
On the policy side, while it's true that both parties have been reluctant to raise taxes, I think it's clear that since the Reagan era, it's Republicans who have moved most aggressively to lower taxes, and in ways that disproportionately lower the taxes of the wealthy.
https://givingpledge.org/pledger?pledgerId=177
I think he’s already given away more than 50% of his Berkshire holdings.
Because he is advocating systemic changes.
He may very well also give money away to people in need (it seems he does), but this would not actually address the issues he is alluding to here since it would not change the system. Hence there is no value for him to bring it up here.
How many people are there in less comfortable circumstances? 100m? 1bn? Buffett personally doesn't have the time to go handing money to everyone.
He is, probably sensibly, a believer in the conventional system in functional countries - taxes get paid to the government which then has policies to help the less well off.