The Compound and Friends - The Compound's Post-Election Special with Callie, Ben, Michael and Josh

Episode Date: November 6, 2024

On this special episode of Live from The Compound, Michael Batnick and Downtown Josh Brown are joined by Ben Carlson and Callie Cox to discuss their post election investing ideas. This episode is sponsored by Rocket Money! Visit: http://rocketmoney.com/compound and cancel your unwanted subscriptions today! Sign up for The Compound Newsletter and never miss out! Instagram: https://instagram.com/thecompoundnews Twitter: https://twitter.com/thecompoundnews LinkedIn: https://www.linkedin.com/company/the-compound-media/ Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick, Callie Cox, Ben Carlson, and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey everybody, my name is downtown Josh Brown and I am here with the investing Avengers. We have assembled today for our first ever compound post-election special. Allow me to introduce my colleagues to you. First up, Riddles Wealth Chief Strategist, Callie Cox is here. Ben Carlson is here. Michael Batnick is here. And we are going to break down some of the biggest reaction stories.

We're going to keep this mostly away from politics and mostly toward the economy, asset classes, reactions in markets, et cetera. And we are so excited to see how many people have joined us for the live. I would say hello to people, but I feel like we want to get straight to the content. Today's show is brought to you by our sponsor, Rocket Money. Rocket Money is a personal finance app that finds and cancels your unwanted subscriptions, monitors your spending and helps lower your bills so you can grow your savings.

Rocket Money has over five million users, has saved the total of 500 million and canceled subscriptions. Stop wasting money on things you don't use. Cancel unwanted subscriptions by going to rocketmoney.com slash compound. All right, guys, let's start with me. Last night, last night I had the privilege of being live on CNBC. They covered the election the entire night, I think for the first time from the New York Stock Exchange.

Basically, I want to show you guys some pics. They had a party. Here I am with Adam Parker and Courtney Garcia, Tom Lee, and of course, Scott Wapner. We had, this was like the markets desk that they would cut to when we were going to discuss like the futures or Bitcoin or the dollar or whatever. What's the next picture we have? So this is us on air. I got on like three times. I feel like I did my thing. Next one. Thank you, Michael. So, I wanted to show you guys this. This is the world famous boardroom. This is like where they do special events. It's kind of like a ceremonial space on the sixth floor of the New York Stock Exchange.

And so they threw a big watch party and I got to meet or say hi to like some really, really big names. Gary Cohn was there. I met Dan Loeb for the first time. He acted like he's never heard of me. That was interesting. I saw Mark Lazare, who I absolutely love. It was a lot of high level people from Comcast, of course, the parent company of CNBC. And I got to hang with Lynn Martin, who's the CEO of the New York Stock Exchange.

And she was awesome. And I got to explain all my theories about what would happen as we stood there watching the returns on the big screen. Anyway, I wanted to say thank you to everybody who tuned in last night. And I wanted to say you're welcome. As a shareholder of ICE and therefore part owner of the New York Stock Exchange. I'm glad that we had the opportunity to host you, Josh.

So thank you for coming. Yeah, no, it was a much appreciated invite, Michael. Thank you for making it. All right. Anyway, it was really cool to be in the middle of the maelstrom, so to speak, last night. I wanted to just start a little bit with politics, just in terms of the magnitude of what happened, because when I looked at that entire red country with all the counties that went for Trump, and then you look at what happened in Congress.

That was the coolest new chart of all the charts, right? That show the multi-county view. Yes, that showed where things shifted. That was the newest chart I've seen. That was my obsession last night, just looking at the interactive chart. All right. Tell us what's going on with this thing. This shows the progress that Trump has made in all of the states and the shifts that we've

seen. I thought this was pretty notable. Tough to see on YouTube because of vertical charts. I think, yeah, I think what you need to know if you're listening or if you're watching, you can't quite make it out is that, this is from the FT and they said that all but two states shifted, and this is from 2020,

from the 2020 election, all but two states, and that being Washington and, is that Utah, from the 2020 election. All but two states, and that being Washington and is at Utah, shifted more towards Republicans. So it was, I think we'll get into all of this in a second. One of the things that the market enjoyed, I think about today, is not just who won, but the certainty that there was no sort of disagreement or anything that could get really ugly politically or for the country. Like, we know who's the president, let's get on with it. That's a really important point because there's another universe in which we're talking about counting ballots today.

Yeah, and the fix at 40. Yeah. You know, a lot of people are obviously not happy with the outcome. Fewer people than I would have thought, but regardless. But I do think that people just like the fact that it's over, even if it didn't go their way. This was a low VIX election. Low VIX election's a good point. We went in at a VIX 20.

No, I mean the volatility of this election is very low. Everything was very smooth. It happened quick. That's what I mean in terms of there wasn't a lot of volatility coming out of the election. Oh, Ben. I took it. I took you literally there. I was like, oh, you just said, let me drop some VIX levels on you. Yeah. No, I think you're right.

And I think that's one of the reasons why we saw the stock market react so strongly today. But I mean, from what I saw, people were really braced for something big. I mean, obviously, the headlines were tossing around all these situations about possible unrest, possible like, you know, counting for days and days and days. I mean, if you look at the VIX, speaking of the VIX, I mean, the short term VIX was super high relative to the normal VIX, which showed that people were really bared up for- Wait, what's a short term VIX?

I don't even know about that. Oh, what's the short term VIX? I don't even know about that. Oh, we lost Callie? Oh, awesome. I think Callie's. It's like CBO's. Sorry, you were frozen. Start again. What's the short term VIX?

Damn it, Spectrum. Okay, so the short term VIX, it's like the normal VIX, but it focuses on three to nine days. It focuses on shorter term option demand. And there's a one day VIX by the way, that's like a chaos mode. And should be called a degenerate VIX. Yeah, I mean that doubled going up to election day. But yeah, the short term VIX, it was

funny. You could see like the normal VIX spike in mid October as the timeframe like kind of came over election day in the days after. And then the normal VIX spike in mid-October as the timeframe came over election day in the days after and then the normal VIX came down and the short-term VIX spiked. There was just a lot of demand for protection around election day. What's really interesting is you had a lot of people buying protection, which makes sense. There's obviously a recency bias and we all remember famously in 2020, we didn't have a concession speech and we were still having court cases even past Biden's inauguration. So people were protecting themselves against that potential outcome. The thing is though,

the stock market actually, the S&P rallied 12% from election night in 2020 through the inauguration in January of 2021, which is number one. Number two, stock prices were pretty calm going into this. One of the stats that Sean put together for me over the 30 days leading into the election last night, we didn't have a single back to back negative day in the market, and I think that's the third calmest pre-election period, going back to 1984.

Prior to that, they used to close the stock market on election day. We're approaching 50 new all-time highs this year. It's almost at 50 now. I think today is 47 or something. Kelly, you can correct me, but we're- something like that. This year has been an unbelievable year for the stock market. You know how we spend a lot of time debating when did the bull market start, when did the

bear market end? It was 2009, it was 2013. Let me throw a grenade into the mix. Do we need to start rethinking how we measure returns of presidents? Because let's look at today, for example, the S&P is up two and a half percent. The Russell is up 5.8 percent. Is this Joe Biden's gains? Because the history of record books, the record books will give this to Joe Biden, but let's

be honest that- Stole it. He stole it. Today has nothing to do with Joe Biden. But- Today has nothing to do with Joe today. He started on election day. Okay. But Josh's quote about the 12% rally between the election and January, you could argue that was from the vaccines. Oh, and people have, yeah. Oh yeah. Oh yeah. I think Pfizer announced the vaccine in November.

So it was like November 8th. Yeah, it was like 100% a few days after. I don't know. I think Michael raises a good point. If we're going to a, I mean, we all know that we're not supposed to do this anyway. But if we're going to ascribe stock market performance during a presidential term, but there's a change in control. There's an election year, you know, toward the end of that. Maybe that's where it should end because nobody trading today is trading based on Biden's last eight weeks. I think that's pretty obvious. Well, they are, but for better reason. Well, because they're coming to an end. Right. Yeah, yeah. That's an interesting point.

because they were coming to an end. Right. Yeah, yeah. That's an interesting point. Yeah, take. Let's put this chart up. This is just basically the reaction illustrated. The Russell, this is from the end of October. So this basically like four days, the Russell's up seven and a quarter percent, the Dow's up four percent, almost four percent. You've got a Nasdaq rally of two percent and the S&P up two percent. I mean, these gaps are huge, but again, this is coming on the heels of a rally that's been going on all year long. And I guess the question now is, like, what stops this into year end?

Is the chase on? What do we think? Small caps are up 6% today. Yeah. 6%. That's gotta be the biggest one day gain since when, 2020? It's gotta be. Yeah, it's 2020. And fourth largest gap, sentiment trader tweeted like fourth largest gap

up open this century. Bespoke said 18% of Russell 2000 stocks are up 10% or more today. One fifth of all stocks in Russell 2000 are up 10% or more. Let me ask you guys a question like why? Because what the narrative around small caps, and not just the narrative, like the actual price action has been very much dictated by interest rates. And so, okay, so why are small caps up so much, please? Thanks.

Local companies aren't paying tariffs. Oh, that's good. Wait, I agree with Josh. I think it was banks. Oh, you think it's regional banks? Oh, okay. Yeah. Yeah.

I got too mad over there. Banks and the S&P were up like 5%. Banks are not the biggest holding an IWM. No, but they're making the most outsized move. Regional banks are trading like biotechs that just got approval for a drug. It's crazy what's going on there. Financials are actually now. Now they are the biggest after the rally. Yeah. Okay. And look, but like, if you just look at, look at financial charts, like individual stocks

in that group, small cap financials. Well we've got a few. I mean, these stocks have done nothing, nothing, nothing, nothing, nothing, and then all of a sudden everybody wants to be in the same trade at the same time. I don't think there's a lot of short interest in these things. I think it's buyers. No. Somebody tweeted, Goldman had the best relative day to the S&P since 2009.

So we're going to get to banks in a minute. But I want to talk about the prediction market and the trades going into last night. So I think the predictions markets had it right. The people who are putting their money where their mouth is, they were right. I don't know, they could have been wrong. I don't want to ascribe gospel to the prediction markets. But that being said, we're all markets people. And generally, I do defer to the wisdom of the crowds and the wisdom of the prediction

markets were right. And so we saw this trade going on over the last couple of weeks and it was all the same thing. It was, chart on please, it was the odds on the left hand side, I'm sorry, next chart please. No, the previous one, DJT and Bitcoin trading. There we go. Thank you. On the left, we have the odds that Trump was going to win from the polymarket.

You have DJT, another proxy for Trump's likelihood or unlike the head of him getting the nomination, and then Bitcoin. They were all moving for the most part in lockstep. They were all telling you the same story. You can't deny that these three things are all doing the same thing. It's the same chart. It's the same chart. I thought it was super interesting last night that the betting markets, and we have a chart from Cal-She, was so far,

so far ahead of where the media was. And the genie is definitely out of the bottle on this one. There's no going back. Cali, do we have to respect these betting markets now as though they're real markets at this point? Yes and no, because no, they're not real markets. They don't have an order book and I could get really nerdy with you on that one.

But at the same time. I want you to, I want you to. Go deeper on that. I don't know all of the reaction functions, but you're not buying a share from somebody else, right? For every buyer, I wouldn't imagine there's a seller. I don't know if it works that way. But I...

Well somebody has to take the other side of any bet that you make. Well, is that liquid enough though, right? Callie, that's the big thing. I think, right? They're not super liquid. There's a lot of like watch trading going on. It's not really when you break it down,

it's not quite the same thing as the markets that we're used to. But then again, you're right, there are people going on there expressing a view. In a way, it is a market. They replaced Nate Silver last night, though. That's my take. The pollsters are done.

Totally. Was Nate Silver downgraded to Nate Bronze? Nate Silver, yes. He got downgraded to a strong sell. Well, I mean, seriously, Jon Stewart opened up his reaction to the election last night by saying something I can't repeat here to the pollsters.

What do you ever want to hear from these people ever again, honestly, at this point? Honestly, they remind me of sell-side analyst targets. They don't know anything. Just like everybody else. Well, their service is don't tell me your opinion, show me your portfolio. And the portfolio is the betting market. So Robinhood, which just got legalized, Robinhood opened their prediction markets, what was it like three weeks ago?

I don't know the exact date, but they did $500 million in volume. And that's just Robinhood alone. So how she and Polymarket did a lot more than that. I got this wrong. We were talking to Jack Reigns last week on the compound and friends and my take on this was like you will have to respect these things eventually because it's people risking their real money but it's like too nascent and probably what you're seeing in the market action is a reflection of who's doing it. How many women are on polymarket trading the election?

Zero? Five? How many young men? 99%, let's say. So my take on it was like, this is just reflecting who is involved with this kind of shit, and it's not reflective of the whole population. That take either was proven to be wrong last night,

or just coincidentally. I don't know. I just don't know. So we don't know, it's a sample size of one, because if Kamala won, would we have said that the prediction marks were bullshit? We don't have the counterfactual. Yeah, there'll be a 60-40 in the future

where the polymarket gets it wrong. I don't want to say, oh, see, it was wrong. But it. But show them, show them. Go ahead,. But I got a question for you guys. So the big move today was large caps and small caps up big time. The dollar was up. Foreign stocks got killed. Gold got killed. And what else got killed? I think bonds got killed because rates went up. So what if we're saying one of those first order moves is an overreaction, which one is it? Because I tend to think it's rates.

Oh, you think small caps, okay. Gonna sell these things in a week. There's not gonna be another election. Listen, these are mixed signals to me. We're now facing down, the biggest risk now, going forward, is the resumption of inflation or the continually high stickiness of inflation. And I don't think the Fed's going to change their playbook tomorrow with the FOMC rate decision. I think that's locked in. They already signaled it.

But if we're really going to go into this tariff conversation again, inflation is now going to be front of mind for the Fed. That's a return of that. That's not good for the trade where you think rates are coming down. I promise you, it's not good for small caps, even if they don't have to deal with tariffs. We learned this over the last three years. Inflation is much worse for small cap companies and their earnings than it is for large cap companies, which were largely unaffected. So I think they're going to get out of this Russell trade fast.

Sigel We don't know what the implications of tariffs, you throw that into the mix. We've never seen that. Ben Felix Well, we know they're inflationary, definitely. Lacyy K維K We also saw them in in 2017 and 2018 and profit margins got rocked by them. I want to tell you that tariffs are, it's a different type of inflation. It's what's called demand. It's their demand destructive.

So yes, they're inflationary, but not inflationary in a good way, like the economy is doing great. They actually destroy demand. We learned that in 2018. But what if they raise demand for smaller domestic companies? That's possible. No, they destroy business and consumer demand. I don't mean demand for stocks. Their demand is destructive functionally.

Okay. Let's show the chart on the market reaction to elections. So short. Wait, wait, wait. What do you guys think was the biggest overreaction? I mean, I think it was bonds, but I think this also matters when you're talking about timeframe. I'd say short term, I'd say it's bonds.

I agree. Because the reaction was just so strong that I feel like it's got to come back, especially because it was based on a lot of speculation, for lack of a better word. These policies that are being thrown out, we don't know the timing of them. We don't know if they're even going to happen. Yes, with a unified Congress probably will. But even with a unified Congress, it's not like everything passes easy peasy. But God, did you see the 30 year today?

Come on. I was about to say, Callie, the long end especially. So why would Trump's economic policies be so much better for economic growth? I think that's very much up for debate. Because we're going to make America great again. Right. Of course. Well, no, they're inflationary, Michael. Oh, so you think it wasn't economic growth?

I think it's inflationary because you saw break-evens move. Yeah, I think there's a ceiling on bond yields. So I don't think they can go up as high as quickly as they moved today. OK, Ben, we said that last time when the 10-year broke through 2%. We said this would be a lot of buyers. This would be a lot of buyers at 2.5%. Hold on. On its face, they're inflationary.

He's saying 60% tariffs across the board on China, 20% tariffs on all of our other trading partners, 100- other countries, on its face, that's an inflationary policy. They might not mind the inflation because they think this accomplishes something else. But I don't know, like the 10-year went crazy last night immediately, because everyone understands that a red wave, to Callie's point, regardless of the timing, it's a high likelihood. But you guys think this bond thing reverses and that people are too excited about stuff. I think if you ask me over the next month which trade reverses, I would say bonds.

Go beyond that, I think it would be a little bit harder to say. Michael, what do you think? You know, I think that an overreaction and a reversal prediction are not the same thing. I think the bond move is an overreaction. I don't necessarily know it's going to mean refer to that. I don't think it's going to come undone the next week or two. None of us think the reaction in the dollar or Bitcoin was the overreaction? Not Bitcoin for me.

I think that's pretty much what everybody expected. Yeah, but the counterpoint to that is Bitcoin is so sensitive to headlines that I don't know. It's so hard to say. Well the headlines are all going to be positive for Bitcoin from here on out because somebody so I don't know who but somebody has gotten it into Trump's head that Bitcoin might be instrumental in paying off the national debt. Some of the things that I was listening to last night, and I'm not going to repeat who

said what, but there's a genuine belief that this administration is going to buy a million Bitcoin or take take our the United States holdings in Bitcoin currently at 200,000. Take it from Satoshi. You don't know. She doesn't deserve it anymore. We have it. We have it because it's all right. We have the confiscated Bitcoin.

I have 200,000 Bitcoin now because of the Silk Road confiscation. And there was some selling but that seems to have stopped. And now the idea is if we go from 200,000 to a million Bitcoin and Bitcoin can just get to $36 million per coin, we wipe out the entire national debt. This is the things that are in that scenario, Michael Saylor becomes the wealthiest person in the world and MicroStrategy goes to $10,000 per share. This is something somebody shared with me last night with a very, very, very straight

face. And this person is hearing this from people that are in the administration. So Bitcoin could become a reserve asset, just like gold. It could become so mainstream that the United States government is borrowing against it and accumulating it and doing all these things. I have no idea if any of this is feasible. I think that you guys should hear this from me. You are going to be hearing these theories and ideas from Elon, from Trump, from whoever

the hell he picks as his Treasury Secretary. This is now going to become mainstream thinking amongst Republicans. Republicans who are very much in power. What's the woman from Wyoming, Callie, the Senator? Yeah, she tweeted it today. Cynthia Lumis? Lumis, yep. What do they do when it falls 40% in a month like it does when we have one of these crash

situations? Keep buying, then it can't fall. See this is the way they're thinking. I'm not saying like I agree with this. If they say we're going to accumulate up to a million, if just the act of saying it. It's going up, it's going up. Who the f*** is selling it? Like honestly who would it's it would almost be

financial malpractice if you tell Somebody that you're managing money for to sell their Bitcoin if you know The government has now decided they want to build a strategic Bitcoin reserve So that's what people are that's these are the weird that I'm now hearing. Coinbase was up 31%. It's got to be the biggest move in history. One day move? Speaking of one day moves, let's just do this real quick. Day after election reactions, Rob returns.

We went back to the two previous elections. So the Russell 2000 is a standout today. Stocks green across the board. Bitcoin is the huge winner. Gold was an interesting move today. Clearly a risk off type of move. I'm sorry. Why do you guys think that? Because today was a risk on day. Dump risk off assets. That's it. Consumer staples got hit today. It was too defensive to work today. So here's what went down today. Gold, utilities, and consumer staples. In real estate, real

estate was the worst performing sector. Which was kind of weird because real estate is kind of a... That's a rates thing, right? Well that's a rates thing. Let me ask you this. Could we have like a really strong economy when there's a clear recession in housing? And I would say like as crazy as it sounds, that's what we've experienced for the last year and a half. Like the economy's been chugging along with a deep freeze in the housing economy.

So I had this kind of high list. Which you would have thought, you would have thought it was not possible. So I pulled up mortgage rates today and it was 7.1%. Okay, so here's my question. The Fed can lower short-term rates all they want, but if long-term rates stay higher like this and mortgage rates are at 7%

and the spread doesn't compress, what's to stop Trump from telling the Federal Reserve or the Treasury, hey, start buying mortgage-backed bonds in Treasuries. I don't like these higher rates up so high. Will he try to intervene in the interest rate market and bring rates down if they don't cooperate? Well, that's a conspiracy, but I thought about this too.

I mean, we can go there. No, that's not a conspiracy. No, no, no. What I'm saying is no. Okay. No, it wouldn't shock me. Of course. I like thought about mortgage rates coming

in here and that being a super big challenge for Trump, especially because the perception of the economy right now is, you know, everything is really expensive and mortgage rates are one of the poster trials, right? Definitely didn't think about that that alternative, I suppose it can happen, like crazier things have happened. But I mean, that's going to be that's going to be a big challenge for him having to thread the needle there. So Harris was proposing like a $25,000 check to first time home buyers or young home buyers or something. And everyone laughed because everyone said,

oh, okay, so basically every house in the country just add $25,000 onto the price. Wouldn't Trump trying to do something like that have the same effect? It's like, you're going to push down mortgage rates, therefore, you're going to bring out more home buyers. Guess what? The result is not going to be more affordable homes. It's just going to be a higher average home price.

It's really hard to fix this. Well, this is the debate. This is the debate. Because the home buyers aren't there. Would it unlock home sellers? Would it allow people to get a mortgage? It's not punitive. That's the problem There's nobody who could sell we need more sellers Yeah, I guess like when you say the housing market's been in a deep freeze I would just say the the nuance to that is existing hand

So existing home sales have been in a deep freeze Home builders just had one of the best 12-month stretches ever. But they're slowing down now. The rates have been so high for so long, they're finally slowing down. The home builders got killed today. Home Depot too. Home Depot is down 3%. I own the stock.

ITB was down a decent amount. So yeah, those are obviously in the crosshair. But anyway, it was a bonanza on Wall Street today. Yeah, 26% of the S&P 500 stocks making a new all-time high, which is as good as it's been since the mania of late 20, early 21. Cali, you said this is the relief rally to end all relief rallies. Let's get into that because I think you're exactly right. Yeah. Well, I want to say, Michael, there's a thin line between excited and frantic, and I think

we crossed that line today kind of based on what you were saying, the 2020-2021 comparison. Yeah. So the S&P ended up just above 2% today, and it was the strongest day after election day, after our presidential election day, since my data started in 1950. I mean, it was a monster relief rally. And to be clear, we've seen this a lot pretty recently. I think in 22, we had a 2% relief rally right after the midterm elections. I mean, obviously, in 2020, we had the vaccines a few days later. So I can't remember what happened the day after, but we saw a relief rally eventually. Yeah, it kind of goes back to what I was saying. Everybody was so braced for something really bad. And then, you know,

suddenly it wasn't as bad as we expected. So boom, relief rally, rain in the desert right there. We missed this meme, but I still want to post it. This is pretty great. Back to the polymarket stuff. So basically, polymarket almost perfectly, and they, you know, I think they tweeted this, almost perfectly forecast. Not just the overall election result, but pretty much every state, or did they get every single state?

But wait not they us and when I say us I don't mean like us people but but the people so so one of the really interesting things about the environment today is just the continued declawing of mainstream media in terms of getting away from watching CNN or whatever network to look at like the exit polls and what's the latest polls because people are watching Polymarket, people are watching Cache. Same thing with Donald Trump going on Joe Rogan and not going on TV to do his meet.

Or Kamala Harris skipping Joe Rogan because she wanted to do an hour and he wanted to do two hours or whatever. He normally does Also, I'll see also going on caller daddy, which is one of the most listened to shows among millennial and Gen Z women So it's not like she didn't play that game My wife was watching NBC or something last night and I was watching polymarket and it was like 1045 and I told her hey It's over. You don't need to watch anymore. She's like, what are you talking about? They're still talking about their counting and I said no trust said, no, trust me, it's at 90%. It's a done deal. And yeah, that changed the way that I viewed the markets.

Yeah. Yeah. So one of the biggest winners today are our banks. I'm trying to think like, is this a net interest type of deal? Or is this less regulation and a continued healthy consumer? But let's just throw this chart on because it was just such an extreme move. You don't see a $700 billion bank gaining 10%. Wells Fargo-

JP Morgan is up 10.5% on the day. Yeah, Wells Fargo up 30%. Wells Fargo, Bank of America up 7%. You saw these type of moves in 2020, next chart please, and you saw these type of moves in the GFC as we're whipping back and forth between down 10% up 10%, but to have a 6% move in the XLF when we're at all time highs is wild. What do we think it is? I think it's dereg. And I think to take it a step further, it's the expectation that banks are going to be able to buy more shares and pay more dividends.

Oh, I really I mean, I can't imagine this is a replay. And the reason why I say that is because, yes, obviously, rates moved a lot. We've seen a lot of rate volatility over the past year. We haven't seen moves like this. It'll be interesting to see which of the banks even have the appetite to do bigger buybacks, bigger dividends. I don't know, for example, that Jamie Dimon is saying today that he wants to do anything differently than what he's been doing. Well, it's hard to say.

The flip side is it's hard to say, but I mean, the flip side is, it's hard to say what the appetite is because they, I mean, this is a regulatory thing, right? They have to get their dividends approved. I'm not sure if they have to get their buybacks approved, but I wouldn't be shocked. But what do we make about like- This is something that they haven't had a lot of leeway on.

I changed my answer. This is the biggest overreaction. I never would have guessed financials would be up this much. So Discover, which is basically pure credit risk to the American consumer, was up 13% was Discover up today. Discover was up 20% today, 20%. Discover Financial, regional banks were up 13%.

These are wild moves. Yeah. I think one of the things that we want to avoid doing is extrapolating one day because these moves are not likely to be repeated tomorrow. And one of the things that happens with people that jumped in on trades because of the election today or even yesterday in advance, like they get bored. If we don't get another 10% rally in JP Morgan, a lot of the people that bought it because it was up so much, they come out of the stock. And as a result, these things tend to like wind down.

I don't think that we should look at this and say, okay, these stocks are all going to make 13% moves every day into year end. So much of this stuff, it maybe doesn't go back to where it was, but I think it's got to cool off. Yeah. And in frantic markets too, you have big up days and you have big down days. People just think about up, up and up, especially after that first move. But no, you see the biggest up and down days and really frantic, sometimes even bear markets. Yeah. It's important to catch both sides. Do you think there are people that just felt

like they had to do something today? Oh yeah. Yeah. If you were waiting for the dust to settle or you were waiting for the election, you have all the clarity you needed. Like Josh, you've been hammering the point that the market left certainty

and we have no idea how the market would have reacted if Kamala swept the way that Trump did. I'm guessing the stocks that were up, it probably would have been different baskets and who knows. But the fact that it was so decisive and that the worst didn't come to pass in terms of contested and other really terrible shit didn't happen, the market breathed a huge sigh of relief. Yeah, I think you would have gotten a relief rally if she won. I don just, I don't know that it would have taken place in Bitcoin.

No, no, no, no, no, no, Bitcoin, no, Bitcoin would be down 20% if she won. Right. Let's do this dollar crude gold chart. Somebody walk me through what's going on here. So this is just a reaction of these four asset classes. So on the 10 year yield, we have that index to the right-hand side just so it's cleaner. So anyway, as we already discussed, you saw the 10-year rip, you saw the dollar rip, that's the green line, you saw a crude oil bounce, and you saw gold, the risk off trade, or I

guess the opposite of risk on whatever, that is risk off, you saw that dump. So, this is an interesting instance where gold and crude are diverging, which I guess happens often, but gold and Bitcoin seem to have been one trade throughout the course of the summer and fall. And that divergence is interesting. Well, this is the great thing about markets, Josh, because the narratives change. I think that part of the narrative that was driving gold was concerns about the deficit. And probably that was bleeding into Bitcoin, or at least you can plausibly make the argument,

I think, that Bitcoin was rallying as the odds of Trump winning increased. But narratives change. Things become correlated to different pieces of news. And that's where we are today. The deficit is probably going to get worse and gold goes the other way. That's the funny thing about it, to your point, is the narrative can change. Stocks and gold were both up 40% over the last year and now gold reverses. I want to quote James McIntosh from the Wall Street Journal talking about the election

reaction today. He said, markets are clear about what Donald Trump plans for his return to the White House. Stocks are up, the dollar and treasury yields soared, and so did banks and Bitcoin. All are easy to fit to Trump's promises. Corporate tax cuts almost automatically boost stocks. Tariffs almost automatically mean a stronger currency. Bigger deficits mean higher bond yields. And easier regulation helps bank stocks and Bitcoin. Whether this knee-jerk reaction proves right in the longer run is another

matter. So that's really framing like, alright, so we have this reaction. Now how much of it is realistic to stay with us? I want to put this dollar chart up. Kali, what's your take? This was the first thing to move last night that caught my eye. What's your take? Is this just the tariff story or is higher potential economic growth in the mix here? What do you think is going on? Well, currency markets are famously really hard to read because, of course, you have

two sides to it, right? You have the dollar and then you have everything else. Tariffs as a story in the currency market for the dollar. You have the US potentially flexing its muscle, but then you also have other countries having to deal with affected trade there. I think that there are a lot of different stories you could throw into this. If I had to pick one, it's probably tariffs, maybe something around growth. It's so hard to say, but I think given the big move that we saw and the forces going the other way up until today, I'd probably put it more on policy.

It's like isolationism, right? Yeah, basically. That makes sense to me. Foreign stocks are down today. I mean, if you want to wrap it up in a bow, yeah. The Mexican peso sold off like 2.5% versus the dollar immediately. And I haven't heard Trump talking a lot about Mexico this time around, but I looked at that and I said, all right, that makes sense to me.

So wait, so I feel like the whole tone of this talk so far has been like, nothing can stop this train We're gonna we're on pace for our like fourth year of 20% ish gains in the S&P Isn't it isn't like though just the worry that like man? This is this is so overdone and that's just the rug because it seems like that it does seem that there's no barriers anymore Let's just keep going 22 the S&P was down 20%. It was a reset. Right. So yeah, four out of five years. What I'm saying, like, we've been on a pretty darn good run, though.

Like I said, we're up 20% coming into the election. So as much as people say people that the market hates uncertainty, the market was doing just fine coming into the election. It's such a great point. We had maximum uncertainty over the summer. We didn't even know who was going to be the Democratic nominee. Like, people forget how much uncertainty there was. And stocks held up. uncertainty over the summer. We didn't even know who was going to be the Democratic nominee. People forget how much uncertainty there was and stocks held up.

Mark never blinked, really. It didn't really. Yeah. I mean, this bull market has been marked by uncertainty, doubt, and skepticism. It's almost been like part of the fuel of it because we go through these periods of uncertainty, then there's some sort of a resolution and the trend resumes. Well, but markets need a wall of worry to climb. Where's the worry now, to Ben's point? I just told you. It has to be rates, right? Kelly, what's the ceiling? Is it 5% or so that people start going, whoa, whoa, whoa, that's way too high for the stock market? I mean,

10 years, is it something like that? I mean, I would say it's probably around here where people are like, whoa, wait, what's going on? Does this match? I don't know if it matches. And remember, we have a Fed meeting tomorrow. I mean, I was talking to somebody earlier today, and I was like, imagine if Jay comes out tomorrow, and I don't know if he's going to do this.

But imagine if he comes out and he says something not so great about the economy. He doesn't strike the language right or something. All of these narratives could just go poof into thin air. It'll also be interesting. He's got a term to finish out. He was, of course, originally a Trump appointee, but we've also heard Trump telling reporters that he thinks he has a better instinct about where rates should be than any Fed.

He said this. It's not an SNL skit. He said, I think I should have a say. I know better sometimes than they do. I have good feelings about interest rates or whatever. I'm pumped about somebody bringing that up in the press conference because Jay is going to get so snarky about it. Yeah, but it's now going to be part of the new reality and he's not going to have

like an economic advisor that's going to like try to talk him out of it. Nobody's talking him out of anything right now. Mnuchin's not coming back? What's that? Mnuchin, he's not coming back? No way. Mnuchin is running New York Community Bank, I think. Who is going to be some of his economic advisors?

God, I shudder to even ask that question. The protege partners guy, Scott Bissette or whatever his name is, he's been talking, John Paulson, the one hit wonder, greatest trade ever, he's in there. Yeah. There's a big list of people that would take it in a second. I saw Gary Cohn last night at the NYSE and he famously came in as the economic advisor and was able to dump all his Goldman Sachs stock tax free. Good trade. Which amazing trade. We think Elon is going to get appointed and historically, like traditionally, you sell your stock, you

take the job, you get the tax free sale. Elon might like talk his way into, I only want to sell half and like no one's going to like who's going to stop that from happening. He might be able to get out of $80 billion worth of Tesla stock on like a selling on a regular basis like a traditional plan. And he might be able to do that tax free and who's going to say no to him? So I don't think he's going to be Treasury Secretary, but certainly there's a long list of people who I think would jump at that opportunity.

So let's do this thing on breakevens. Callie, can you kind of walk us through why this is something important to follow and what these charts are showing? Yeah. So this is all about inflation. And when we're talking about breakevens, we are talking about the difference between nominal treasury yields, so like the 10-year yield, and then the yield that you can get on comparable tips. So treasury inflation protected securities. That difference is basically what the bond market is baking in for the expected inflation rate over a certain period of years. And I want to show you this because the 10-year has been rallying since the middle of September.

And I know that there's been a lot of talk around it. In fact, like two weeks ago, Michael and I were talking on what are your thoughts about how the 10-year really is rallying because expectations were just so low for the economy. One of the reasons why I was saying that was because breakevens were basically stable for weeks. Now, they're rallying higher again. Honestly, as investors, we want to see sustainable growth with gradual inflation. And breakevens are telling us that we had that, that the growth that we were seeing, the expectations that we were hurtling in October were that kind of sustainable growth that wasn't going to spike inflation worries.

And now we're seeing breakevens tell us that like, oh, okay, we're going a little overboard here. I would worry about this a little bit more. Inflation may be coming back as a risk. So that's what caught my eye. Tips look good here to me. I've always been taught two to 3% real yields is a really good, like 3% real yields is like a screaming buy. And so we're at almost 2.5% real yields

on twos, fives, and tens. I don't know, tips sound pretty good to me in this environment. And if you're worried about unexpected inflation, I mean, if you're worried about inflation coming back because everybody's going crazy and it feels like the environment of 2020, then tips are your asset. One of the great things about modern times is tips are really easy to buy for anyone because you could buy it in an ETF form. And it's just if somebody wants to put that on as an asset allocation piece, it takes

literally seconds. They don't have to worry about maturities or any of that stuff. It's already baked into the product. I wouldn't be surprised. Yeah. And I can only imagine the talk about inflation is going to get worse and worse from here. I pulled this from Bank of America's chief economist, and basically they break down the four key policy issues ahead.

And I wanted to share these with you guys because there's so much conversation right now about the thousands of things that both candidates had been saying on their respective campaign trails. So like, all right, now we know who the president is. We know that he sort of has a mandate to do stuff. What are the main things? It's good to not have a laundry list of 50 things. Here are the four.

US Presidental, key issues to focus on if Trump wins. Fiscal policy, trade, immigration, and deregulation. So there's no clarity on fiscal until there's clarity on what the House races wind up as, which I think as of right this moment, we don't fully know and we know it's still really close. But the Tax Cuts and Jobs Act, whether or not those tax cuts get extended by the end of next year, that's going to hinge on what happens in the House. And I think that's a big one.

The second one is tariffs on China, which we already talked about. And the idea at Bank of America is that that's the main thing that could derail the Fed's cutting cycle. If that gets rolling fast, that could curtail the terminal level of rates in this cutting cycle. That could actually stop that cold. Again, it's going to be a timing thing. The immigration thing is interesting.

Again, this is one of those things where we don't know how far he's willing to go, what the timing is, whether or not he'll be able to get this done. I don't think it's an executive order, but really clamping down on illegal immigration, which I think is guaranteed, and then starting to deport people. What does this mean for labor force? What does this mean for wages? Thoughts? I mean, it's supply and demand, right?

Foreign born workers are 20% of the labor force right now. And remember, foreign born doesn't mean, I'm not saying illegal immigrants here, I'm just talking immigrants in general. So that, I mean, that's a really big part and they are concentrated in certain roles. So I mean, it's supply and demand. Take some supply out, then- That'll push wages higher, no? Yeah, it would.

Like 40% of home construction industry is foreign labor. Yeah. So you could see some pointed effects in industries. Also wanted to mention here deregulation. effects in industries? Also wanted to mention here deregulation. I don't know how to quantify this. I don't know, more drilling sounds like the first most obvious thing that'll happen. Pulling restrictions off of big text. Dude, Google is up 4% today. Josh,. We own the stock Google was up 4% today

You tell me that deregulation is not a really good thing for Google Yeah, I don't know how to quantify it But I think Lena con not being at the FTC as a starting point huge not please continue Yeah, but then there's the push-pull. I don't think Trump's a big fan of Google the company and I think I think you know, there have been historically issues. So like- Well, he's not vindictive, so it should be fine. Yeah, yeah.

Like yeah, it's great if there are mergers and acquisitions again, and there's less of a heavy hand on regulation and capital formation. But also, we're going back to this thing where he goes on Twitter and yells at CEOs. And I don't know if that's a push, like in favor of one side or the other. But we sort of have a little bit of muscle memory here, right? Yeah. I like how you highlighted that there are tradeoffs too. This isn't just black and white. You really have to think through the reaction functions of everything.

Okay. Let's go to this thing from Gina Martin Adams. What are we saying here? Yeah. Can I actually chart on John? Can you put up the tax chart? Effective tax rates? Here we go.

I have two in there, so I wasn't too specific there. Okay, so Gina Martin Adams, she wrote a really good piece, by the way, she's at Bloomberg Intelligence, wrote a really good piece on her thoughts around markets and how they'll digest all of Trump's policies. She made a couple really good points on the tax side too. And look, the corporate tax rate I think is going to be the biggest driver of what we see in markets. I think deregulation could be a close second.

I mean, I'm especially saying that after today. But I mean, if you look at stocks that have rallied a lot over the past month or so, you can kind of fit them into these loose buckets of Low tax rate and high tax rate sectors. I mean you see on the on the on the left you have, you know consumer discretionary materials being some of the most burdened by You know taxes and on the right you see real estate and utilities being the least burdened by taxes and there's a little bit Of a rates trade here, right? You can't like fit them into neat buckets here.

But what I liked that Gina pointed out was that, she compared it back to what we saw in 2017, 2018, when the corporate tax rate was dropped from like 28% to 21%. And she noted that net income as a share of EBIT, so earnings before interest in taxes has been dropping as the TCJA has expired. Basically taxes are becoming less and less of a story for earnings, but there's still a big story as you can see in this kind of share of what different expenses are pushing

around earnings. I mean, taxes are more of a share than interest expense, which is pretty safe. I can't believe interest expense didn't go up. Sorry to cut you off, Call mean, taxes are more of a share than interest expense, which is pretty- I can't believe interest expense didn't go up. Sorry to cut you off, Callie, but just one of the wildest things about the last couple of years is that net interest income went the opposite direction, or net interest expense, I should say, went the opposite direction of what we would have predicted. Just wild.

Yeah. So wait a minute. Well- The conclusion here is that tax has had a bigger effect on earnings than interest expenses. And like probably if there's an extension of that corporate rate, and I mean, he's told me that he wants to take it lower to 19 or 20%. It's another tailwind for stocks. I don't know if it justifies a 6% Russell 2000 rally every day, but it's certainly something. It's not nothing.

LYN ALDEN GOLDENBERG I think it's a tailwind. I think it's what she's trying to show is that it's a tailwind that's a lot bigger than people think. And it's one that kind of fits neatly into this earnings calculation and these earnings expectations that we hear about from Wall Street all the time, even more so than interest expense like Michael shouted out there. I think the corporate tax rate long term, if we see it change, if we see it stay at about 21% that it is right now, I think this is what has one of the biggest effects long

term. And that sector by sector breakdown is probably what you should be watching if you're worried about. If you're worried about or if you're watching these changes in tax rates and tax policy. Soterios Johnson I want to wrap with just a look at the historical data and just some sense of year one of a new presidency, even though this is sort of not really a new presidency. But I think the thing on people's minds is like, all right, that was cool. Thanks for the rally. Now what?

What do we think is the most salient point of the chart that Chart Kid Matt put together for us on forward returns from election days. So it looks to me like not that big of a difference. And I know the presidential cycle is something a lot of people focus on, but for the people listening, presidential election days one month later, the S&P 500 has historically since 1950 been up 0.8%, which sounds flattish. And one month later from any other day that's not an election day, it's up 0.7%.

So this is not a thing where there's any sort of edge or advantage just because we're within a month of an election day. On the annual return, it's a little bit different. The average return is 7.8%, 12 months after an election day versus 9.1% over 12 months for all other days. So anything else worth saying there? Yeah, I'm going to point out that two of the most recent presidential election days were in 2000 and 2008. So you have to watch that stat. I think this data is really important. I think it's worth looking at, especially if you're one of those investors who's like, oh God, like now the stock market crashes, change feels uncomfortable. That's not necessarily the case. But then again, the sample size is really small and

it includes some very volatile years. My take is I'm more certain that we're going to see sentiment numbers rock at higher in January than we are the stock market. I think sentiment numbers are going to because it's politically charged, we're going to see sentiment numbers in January when he takes over, they're going to go all of a sudden start going up even if the economy hasn't changed much. Yeah, we know sentiment during the entirety of the Biden president was depressed. And I think some of that is a function of who actually answers those sentiment surveys. And that's

been pretty well documented. It's kind of more like a mood ring on how people feel about the politics of the country, way more than it is about how people are actually doing. And yeah, it could flip overnight with like no fundamental change whatsoever. Put this recessions under Democrats versus Republicans. Oh, Matt did this for me. Someone asked me. Someone asked me. I dare you to tweet this.

Someone asked me if I think we're more likely to get a recession in the next four years. And I said, well, geez, on the one hand, we've had literally one recession for the past 15 years and it lasted two months. So if you're playing the odds, sure, there's a higher chance. But I mean, I think a lot of this is just cyclical. I think Republicans just happen to take over during bad times in a lot of these cases. It's not like Republicans cause more recessions than Democrats. For the listener, the red line, total number of recessions started under Republicans, 18.

The blue line, total number of recessions that started under Democrats, 6. This was surprising to me, but I think it's just kind of fun with numbers. Yeah, I agree. There's something there. It looks like there's something, but... It looks like there's something, but it can't be that simple. No. Because if it were, and anyone really believed in this, they would never elect another Republican It looks like there's something, buddy. It looks like there's something, but it can't be that simple. Because if it were and anyone really believed in this, they would never elect another Republican president again. 40% chance of a recession in the next four years.

Mark it here. I said it first. Boom. 40? I admire your courage. All right, guys, closing thoughts. And thanks so much to everyone that joined us live tonight. We really appreciate it. Michael, closing thoughts and thanks so much to everyone that joined us live tonight. We really appreciate it.

Michael, closing thoughts. I think you're allowed to do slurs again, I'm told. And you want to get off your chest. Yeah. So to me, I learned a very valuable lesson in hindsight, guys, because when I digested the results of the election, my first thought was, well, of course. All that Ben and I and the four of us have been talking about for the last two years

is how unhappy people are relative to the economy. Like, we've been screaming that the economy's okay and people don't feel like it's okay. Dumbass, look in the mirror, like this should have been obvious. It should have been obvious that people would vote out the incumbent. Like, of course.

And then I remembered that, wait a minute, I didn't know that yesterday. So, hindsight bias out the incumbent. Of course. Then I remembered that, wait a minute, I didn't know that yesterday. Hindsight bias for the win. Cali, closing thoughts? Yeah, I really like that, Michael. Look, I fell into that too. I looked at the surveys and the sentiment like you did. Yeah, I saw the difference in perception and data.

I knew that there was probably something there, but I even wrote something a few weeks ago about the misery index being the lowest before a presidential election, lowest outside of 2016 since the data was collected in the 1960s. I think my takeaway and something I'm going to be watching for the next few months and definitely the next few years is this approach toward extreme policy. This is a black hole that you could go down forever. But generally, the thinking is gradual controlled improvements, gradual controlled steps forward is the way to go.

This isn't what we're going to see over the next few years, it sounds like. So is this going to be wildly good? Is it going to be wildly bad? Will it lead to a market that looks a little different than what we've seen over the next few years, it sounds like. So is this going to be wildly good? Is it going to be wildly bad? Will it lead to a market that looks a little different than what we've seen over the past few years? That's what I want to watch for. And that's honestly what I'm a little worried about. Benjamin?

I listened to the Jon Stewart thing too, and he played some clips from 2016 and 2020, maybe 2012, about the initial reaction the day after the election, what people were saying. And it's kind of funny to look back on what people were saying, the main takeaways were. And they were all completely wrong. Like, here's what the Republicans have to do. Here's what the Democrats have to do. And they went the total opposite direction.

And I think whatever people are overreacting to now is probably going to be wrong in the next two to four years. Okay. probably going to be wrong in the next two to four years. Okay, my biggest, so I, yesterday I said, I think she wins. So I got this one wrong. And I did the same thing Michael did. Like I woke up today, I'm like, how stupid am I?

It was so obvious he would win. But, like, I think I was reminded how much, and we learned this over the last couple of years, and we've said this a whole bunch, all of us have, how much people truly hate inflation. But it's not the economic statistic of inflation this month or this year versus last year. It's the cumulative effect and how long it stays with us.

I honestly, now at this point, I believe that Americans hate inflation more than they hate high unemployment. That's what I think. I agree. I might be getting like more. I might be going too far. Come on. That's recency bias. I know. Okay're saying. Come on. Okay. But that's what I think. That's how I feel right now that Americans would rather have 6% unemployment than the cumulative 27% inflation that we've experienced. Callie, you look like you have something to say about this. Yeah. So I think you're right.

And it's because more people experience inflation. We all experience inflation because we all buy groceries. We all buy gas. But unemployment, so unemployment during the great financial crisis, 10%, which is really freaking high, one in 10 people. But it's still 10% of people. Not everybody feels it. I think if you gave the American people a choice right now, given what we've just experienced over the last five years, I think if you said, all right, I can wave a wand, 2% inflation, 6% unemployment, or whatever the hell is going on now, I think they'd say, oh, lower inflation. I'll be fine. This is America. We don't look out for each other

to the extent that we think we do. We look out for ourselves. And I think inflation probably was, had a higher impact on this election than who went on Joe Rogan's podcast. I think that was the big thing. Here's full employment. Guess what?

I hate it. Yeah. I hate full employment. Guess what? I hate it. Yeah. I hate for employment. Yeah. I totally agree. And I look, I think the social issues about immigration and the perception of like crime waves in cities and like the cultural stuff about trans athletes, of course, like you could interview a hundred people on the street and a lot of those people

would cite the social stuff. But I think when you ask why do people just feel like things aren't good despite how good they are, the main reason is the inflation and the cumulative effect and just the sheer amount of people, no matter what, black, Latin American, Asian American, gay, straight, everybody hates how they experience the economy right now and how high the prices are. Most of these people don't have stock market assets the way Wall Streeters do. So I really think that that's my big takeaway. And I might be overstating it because of recency, but-

And that's why 30% tariffs will lead to a Democrat in 2028. I'm kidding. There you go. It'll be Gavin Newsom in 2028 and we'll all point to tariffs. All right. Hey, everybody. Thanks so much for joining us. We really appreciate it. Special, special thanks to the team for helping us put this together. The media team, the research team, Callie, Ben, Michael, thank you so much for joining me. And guys, hey, you might not love the impact. You might not love the decision that America made last night. Good news is you have no choice.

So let's all make the best of it. Let's keep investing. Let's make some money and we will see you on our shows, regular shows very soon. Good night. All opinions expressed by Josh Brown, Michael Batnick and their castmates are solely their own opinions and do not reflect the opinion of Ridholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.