Where Will Stocks Go Under Trump? Watch Passive Capital Flows | Mike Green

Follow the money

Well, the election is over and we have a clear victor.

What kind of economy is President-elect Trump inheriting?

And what impact on it are his policies likely to have?

And what does this mean for investors? Where do the opportunities, as well as the risks, lie?

To discuss, we're fortunate to be joined again by Michael Green, portfolio manager & chief strategist at Simplify Asset Management.

Mike has strong opinions on the above questions, though his convictions are strongest that passive capital flows (aka, the “giant mindless robot”) will play a HUGE role in determining the future of financial assets over the coming years.

So where does he see them headed?

Find out by clicking here or on the video below:

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Adam’s Notes: Michael Green (recorded 11.12.24)

EXECUTIVE SUMMARY:

• Michael emphasizes a critical split between financial markets, which have been elevated by passive investing, and the underlying global economy, which shows signs of weakened demand. For example, oil prices remain low despite expectations for higher prices, which he interprets as a signal of economic weakness, particularly in China. Although China has achieved a trade surplus of nearly $1 trillion, this has been due to its reliance on exports rather than a growth in domestic consumption, illustrating China’s ongoing struggle with insufficient internal demand.

• The U.S. economic landscape is increasingly split between asset-rich individuals, who benefit from rising interest rates due to their investments, and younger or lower-income workers, who face higher costs for borrowing. This division leads to different economic realities: while older, wealthier individuals see their wealth grow with higher rates, younger adults need to borrow for essentials, and they experience a tighter job market. The unemployment rate for those under 25 is notably higher than for other age groups. Michael points out that young people struggle to find jobs and internships, especially without access to gig economy options, like driving for Uber, which some states restrict for those under 25.

• The Trump administration's use of tariffs as a tactical, negotiable measure rather than a hardline policy, aiming to pressure companies to move their sourcing away from China. For instance, companies may turn to other countries, like Vietnam, which would then agree to import more U.S. goods as part of the deal. This strategy, if successful, could stimulate domestic production and benefit the U.S. economy. However, if tariffs simply raise prices without stimulating wages or job creation, this approach may lead to reduced aggregate demand domestically, harming U.S. consumers.

• Michael cautions that passive investing, which continually pours money into markets without considering asset valuations, has led to inflated market values. He warns that