Highmoon Capital Weekly: Election, AI & Musk’s Future
Hello Everyone,
I hope this message finds you well! It’s been an eventful week, and we’re excited to bring you the latest insights and updates. We’ll dive into the impact of the recent election, new momentum in the AI sector, and what Elon Musk's strategic moves could mean for the future.
Thank you for being with us as we explore these dynamic market shifts. Let’s dive in!
Election Impact: Market Reactions & Economic Indicators
This week saw significant market shifts as Donald Trump won the 2024 U.S. presidential election, marking a historic return to the White House. Investors are closely watching potential changes under his administration, with sectors like energy, defense, and technologyexperiencing immediate reactions. Notably, stocks like Tesla, Nvidia, and Palantir rallied amid expectations for favorable regulatory conditions, while Taiwan Semiconductor Manufacturing (TSMC) faced pressures following Trump's remarks on foreign semiconductor dominance.
Adding to the market's complexity, new economic data revealed a slowdown in job growth and signs of economic cooling, highlighted by the Sahm Rule approaching recession indicators. Meanwhile, major companies like Amazon, Apple, and Palantir reported earnings that exceeded expectations, boosting optimism across tech and AI sectors.
As the transition to Trump’s presidency progresses, we can expect further market volatility, especially as more policy details emerge. Investors are preparing for potential changes in tax policies, trade agreements, and energy regulations, which will likely shape market sentiment in the coming weeks.
Elon Musk’s Strategic Alliance with Trump
Elon Musk’s alignment with President-elect Donald Trump is creating substantial optimism around Musk’s portfolio of companies. With a pro-business administration likely to ease regulatory restrictions, Tesla’s ambitions in autonomy and robotics could accelerate. Analyst Dan Ives of Wedbush highlights that a strengthened relationship with Trump could fast-track approvals for Tesla’s Full Self-Driving (FSD) technology, potentially advancing Musk’s plans for a large-scale Cybercab fleet. This expansion, targeting up to 1 million Cybercabs annually, could generate an additional $5 billion in operating income by 2030, significantly reshaping Tesla’s model beyond car sales.
In addition, Tesla’s humanoid robot, Optimus, is drawing investor interest with potential applications across manufacturing, logistics, and service sectors. Should Optimus deploy at scale, Tesla could lead in robotics and labor-replacing technology, diversifying revenue streams and fortifying its position in advanced technology.
Musk’s federal ties may also yield advantages for SpaceX and Starlink. Trump praised SpaceX’s role in disaster response and hinted at expanded federal support for Starlink’s rural connectivity goals. Reduced FAA restrictions could streamline SpaceX’s launch operations, while future government broadband initiatives may provide additional opportunities for Starlink.
Beyond these ventures, Musk’s new AI company, xAI, stands to benefit from Musk’s influence over technology policy. As an advisor to Trump, Musk could shape lighter-touch AI regulations, fostering growth for xAI’s technology and potentially positioning it for government collaborations in defense and security.
Finally, Musk’s alignment with Trump may reduce FTC scrutiny over X (formerly Twitter) and support his other ventures, such as The Boring Company and Neuralink. Eased regulatory requirements could help Neuralink’s FDA approval process and facilitate infrastructure projects for The Boring Company. This alliance with Trump is setting the stage for Musk’s companies to thrive under pro-business policies, fueling investor optimism about his expanding influence and the synergies across his ventures.
AI, Autonomy & Semiconductor
This week, the AI, autonomous tech, and semiconductor sectors garnered strong investor attention as potential policy shifts under the new administration could impact growth in these areas. AI and autonomous technologies are set to expand rapidly, with anticipated regulatory support possibly fast-tracking innovation and adoption across various industries. Companies like Nvidia are seeing a rally, reflecting optimism that favorable policies could pave the way for accelerated development in autonomous systems and advanced AI applications.
For the semiconductor sector, Taiwan Semiconductor Manufacturing Company (TSMC) remains in focus. Recent political remarks on semiconductor imports have raised questions about future U.S. trade policies, leading to a pullback in TSMC’s stock. However, we believe this pullback is temporary, as TSMC maintains its position as the dominant player in advanced semiconductor manufacturing. With its unmatched technological leadership, TSMC remains essential to the global supply chain, and its strategic role is unlikely to be easily replaced.
Palantir Stock Rally Under New Administration
Palantir has seen a substantial rally this week, spurred by both a strong earnings report and the potential for new growth opportunities under the Trump administration. CEO Alex Karp, who shares a longstanding alignment with U.S. defense priorities, also has close connections with key figures in the administration, including Trump’s advisor Peter Thiel. Thiel, a co-founder of Palantir and a prominent supporter of Trump, has long advocated for the company’s role in U.S. intelligence and defense sectors.
This connection could provide Palantir with a strategic advantage, potentially leading to expanded government contracts in areas requiring AI-powered data analytics and security solutions. With heightened demand for AI in federal operations and an administration focused on domestic defense, Palantir stands to benefit from expedited contract approvals and favorable policy conditions.
In the current political landscape, Palantir’s ties to key players within the administration position it uniquely for growth. If AI investment for national security continues, Palantir could see exponential growth, further establishing itself as a leader in intelligence and analytics for both public and private sectors.
Financial Stocks Surge on Trump’s Victory
Financial stocks rallied sharply after President-elect Donald Trump’s victory, with major players like Goldman Sachs (GS), JPMorgan Chase (JPM), and Wells Fargo (WFC) leading gains in the Dow Jones. Credit card companies Discover Financial Services (DFS) and Capital One (COF) also drove momentum within the S&P 500. Investors are optimistic that Trump’s administration will focus on regulatory rollbacks, creating a favorable environment for banks and financial institutions to expand profits through increased domestic investment and corporate deals. Rising Treasury yields further boosted banking stocks, with the 10-year yield nearing 4.5%, signaling economic growth expectations that benefit banks’ bond holdings.
The Financial Select Sector SPDR ETF (XLF) rose over 6%, while the SPDR S&P Bank ETF (KBE) surged 12%, reflecting the broader optimism. Citigroup (C) and JPMorgan broke through critical buy points, and the SPDR S&P Regional Bank ETF (KRE), tracking smaller banks, gained over 13%. As Trump’s pro-growth agenda takes shape, financial stocks may continue to benefit, especially with the Federal Reserve poised to announce another rate cut, adding to September’s 50-point reduction and signaling further support for economic expansion under the new administration.
Federal Reserve’s November Rate Cut and Economic Outlook
The Federal Reserve enacted a 25-basis-point rate cut this week, bringing its benchmark rate to 4.50%-4.75%, as part of its effort to balance inflation management with employment support. This marks the second consecutive cut following a larger reduction in September, aligning with the Fed’s approach to adjust rates moderately as inflation trends closer to the 2% target.
In its statement, the Fed acknowledged “roughly balanced” risks to its employment and inflation goals, a shift from its previous stance focused heavily on curbing inflation. Recent data shows easing labor market conditions and a 2.8% GDP growth rate for Q3, slightly below earlier quarters but above long-term averages.
This decision comes amid a changing political landscape, with Donald Trump’s election raising potential economic policy shifts that could drive inflation, such as new tariffs and tighter immigration. Traders anticipate another quarter-point cut in December, with a pause likely in January as the Fed assesses the impact of recent changes.
Despite the Fed’s efforts, market rates have responded differently; for instance, the 30-year mortgage rate has risen to 6.8%, indicating cautious sentiment as the Fed aims to achieve a “soft landing” that lowers inflation without triggering a recession.
Cryptocurrency Market Surge Following Trump’s Election Victory
The cryptocurrency market experienced a remarkable rally this week, driven by Donald Trump’s presidential election win and his pro-crypto policies. Bitcoin (BTC) hit an all-time high of nearly $76,000, with other digital assets like Ethereum and Dogecoin also surging. This sharp increase is attributed to Trump’s commitment to reducing regulatory oversight in the crypto industry, alongside his proposed tax breaks for digital assets and plans for the U.S. to become a global leader in cryptocurrency.
Trump’s policies align with his intention to reshape financial agencies like the SEC, potentially relaxing rules that have previously hindered the crypto market’s growth. This approach, coupled with his pledge to establish a strategic U.S. Bitcoin reserve, has fueled investor optimism, drawing significant capital into digital assets. Trump's announcement at this year’s Bitcoin conference in Nashville further solidified his commitment, attracting substantial support from crypto investors.
Several factors are at play under the new administration:
Regulatory Relief: Trump’s proposed removal of capital gains taxes on Bitcoin and digital assets could encourage more institutional investments and adoption.
Strategic Vision: The plan to create a U.S. Bitcoin reserve underscores a long-term strategy to position the country as a leader in the digital asset space.
Political Influence: Pro-crypto Republican wins in Congress, such as Bernie Moreno’s Senate victory, signal a friendlier legislative environment that could lead to broader industry support.
Despite the optimism, experts caution that potential inflationary pressures, interest rate adjustments, and economic uncertainties could add volatility to the market. Nevertheless, many view Trump’s administration as a pivotal moment for cryptocurrency, positioning the sector for substantial growth in the coming years.
As we wrap up this week’s report, it’s clear that the markets are responding dynamically to recent events. With a renewed focus on regulatory changes, advancements in AI, and ambitious moves in the tech and energy sectors, we’re reminded of how swiftly the landscape can shift. The recent election and favorable economic indicators have set a positive tone, and we could very well see continued bullish momentum heading into the year’s end.
However, as with all market cycles, it's important to balance optimism with cautious insight. While there are exciting opportunities on the horizon, particularly in technology and innovation, we should be mindful of potential volatility, especially around policy changes and economic growth projections.
Thank you for joining us for this week’s highlights. Let’s move forward with a sense of purpose and resilience. Wishing everyone a productive, insightful week ahead and, as always, stay safe and well.
