WSJ What’s News - The ‘Trump Trade’ Takes Hold on Wall Street

Episode Date: October 30, 2024

A.M. Edition for Oct. 30. To pollsters, the race for the White House is a toss up. But WSJ reporter Caitlin McCabe explains that a potential shift in momentum is visible in markets as some large hedge funds and money managers get into position to profit from a Trump victory. Plus, billionaire investor and Trump ally John Paulson promises massive spending cuts if he’s tapped as Treasury Secretary. And AMD investors worry the chipmaker is still a long way from catching up to Nvidia. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Robert Half research indicates nine out of ten hiring managers are having difficulty hiring. Robert Half is here to help. Our recruiting professionals utilize our proprietary AI to connect businesses with highly skilled talent. At Robert Half, we know talent. Visit roberthalf.com today. In an exclusive interview to the journal, billionaire investor and Trump ally John Paulson promises massive spending cuts if he's tapped as Treasury Secretary. Plus Wall Street pros sense a shift in election momentum.

It feels like no matter what asset class you're looking at right now, you are starting to see signs of a Trump trade taking hold. And AMD investors worry the chipmaker is still a long way from catching up to Nvidia. It's Wednesday, October 30th. I'm Luke Vargas for The Wall Street Journal and here is the AM edition of What's News, the top headlines and business stories moving your world today. your world today. Vice President Kamala Harris addressed a crowd of tens of thousands near the White House last night.

And as our Ken Thomas predicted on the PM edition of the podcast, she boiled down next week's election to a choice between her to-do list for the country and Donald Trump's, quote, enemies list. Donald Trump has spent a decade trying to keep the American people divided and afraid of each other. That is who he is. But America, I am here tonight to say that is not who we are. That is not who we are. That is not who we are. Despite the speech's strategic location in the spot where Trump rallied supporters on

January 6, 2021, Harris has focused on his more recent comments in the final stretch of the race, including his frequent talk of combating the enemy within and using the military to push back against dissent. Meanwhile, Trump, holding an evening rally in Pennsylvania, accused Democrats of cheating in the election, though ballots haven't yet been counted. He also claimed to be already winning on the basis of early voting data, which can show ballots returned by party affiliation and gender, but not how people voted. At the same event, Florida Senator Marco Rubio seized on remarks made earlier in the evening by President Biden, who, invoking comments by a comedian at Trump's Madison Square

Garden rally calling Puerto Rico a floating island of garbage, said that the only garbage I see floating out there is his supporters, an insult that Rubio claimed was aimed at Trump supporters writ large. And I hope their campaign is about to apologize for what Joe Biden just said. We are not garbage. We are patriots who love America. And thank you for running, Mr. President. A White House official said Biden was specifically criticizing the Trump backing comedian Tony Hinchcliffe and not Trump supporters. The president's remarks drew comparisons to Hillary Clinton's 2016 reference to Trump's backers as deplorables, a line seen as undercutting

her message of bipartisan outreach. And in an exclusive interview with The Wall Street Journal, billionaire investor John Paulson, an ally of the former president and a potential pick for Treasury Secretary in a second Trump administration, pledged to work with Elon Musk to slash federal spending and take on an expanded portfolio extending to trade and energy. Journal Finance Editor Alex Franckos. The thing that probably stands out is how openly he wants to cut spending and roll back a lot of the subsidies in the Inflation Reduction Act for things like solar and wind and carbon

capture. His quote is, eliminate that. That's maybe easier said than done because there's actually a lot of people on both sides of the aisle who support that spending because a lot of it is for renewable power or carbon capture in Republican-leaning districts. The other interesting thing here is just how openly he's talking about the possibility of becoming Treasury Secretary. Generally, people kind of demure in these situations, but he's playing by a different

playbook and perhaps trying to catch the former president's attention. For additional details from Paulson's interview, including his comments on tariffs and his prediction that he'd face a smooth Senate confirmation, check out the link that we've left in our show notes. And we'll have more on how some investors are lining up behind trades that would benefit from a second Trump administration later in the show. And turning to markets now, shares in Alphabet are up in off-hours trading after Google's parent company reported a 15% rise in revenue yesterday, driven by strong results in its cloud computing division.

Also reporting earnings yesterday was semiconductor maker Advanced Micro Devices. Although the company posted a sharp rise in quarterly sales, driven by soaring demand for its AI chips, AMD shares have slipped off hours, with journal Hurt on the Street tech columnist, Dan Gallagher telling us that investors may have been expecting more. The chip maker actually met all of Wall Street's targets for the third quarter,

and they said that they were gonna sell more of these GPU chips that compete with Nvidia, more than five billion this year, and that's more than double what they thought they would sell at the beginning of the year. The problem is, Wall Street expected that to happen anyway. That was already in analyst estimates and the company didn't give any kind of forecast for 2025 in terms of how they thought those chips would sell. Now $5 billion in these chips in their first year is actually a really good debut, but consider that Nvidia is expected to sell about $110

billion worth of its GPU chips in the same year. So you can see that part of the concern that's holding over AMD is can they ever get to be more than a niche against Nvidia, which has such a strong competitive lead in these AI processors. Elsewhere, Visa shares are edging up off-hours after the payments giant posted higher earnings in revenue yesterday. Earlier in the day, we reported it plans to lay off around 1,400 employees and contractors by the end of the year to streamline its international business. And a packed week of corporate earnings rolls on with Microsoft, Meta, Eli Lilly, Kraft

Heinz and Starbucks among the companies due to release results later in the day. And we'll also get the latest snapshot of US GDP when the Commerce Department releases figures for the third quarter at 8.30 a.m. Eastern. Coming up, Wall Street pros are positioning themselves to profit from a Trump victory. Journal markets reporter, Katelyn McCabe, tells us what they're betting on and what it all means after the break. Robert Half research indicates nine out of 10 hiring managers are having difficulty hiring.

Robert Half is here to help. Our recruiting professionals utilize our proprietary AI to connect businesses with highly skilled talent. At Robert Half, we know talent. Visit roberthalf.com today. Talk to pollsters and the race for the White House is a toss-up, but as we report, some business leaders after months of sitting out the contest

are now cozying up to Donald Trump, seeking a sort of insurance policy on the tight contest. And there's a sense on Wall Street too that momentum in the election has shifted with Journal Markets reporter Caitlin McCabe seeing signs of investors backing trades that could pay off in the event of a Trump victory. And Caitlin joins me now with more. Caitlin, we have a lot of different assets we could talk about here first as we look for signs of where the momentum is within markets vis-a-vis the election. Where should we begin? Katelyn Johnson Yeah, Luke, you're absolutely right. It feels

like no matter what asset class you're looking at right now, you are starting to see signs of a Trump trade taking hold. So let's start with equity markets. You've seen a lot of stocks considered to be Republican friendly really performing well this month. So looking, for example, at private prison stocks, crypto related companies, bank stocks, some of these are up 10, 20, even 40% month to date. And then of course, you have the stock known as DJT, that's the parent company of Trump's Truth Social platform. And that stock has really

just been skyrocketing this month and is really seen as a barometer of the growing momentum around Trump and markets. Those stocks performing well, who's getting behind them? So it's really a mix. I mean, certainly you have retail investors jumping in, they especially love DJT. But when you start looking further across the spectrum into other types of asset classes, start looking at potentially a bit more sophisticated trades, those are largely hedge fund managers and asset managers that are doing this.

And so I've been talking to a lot of them this month and they've started to say that they've been shifting their portfolios in the direction that would benefit if Trump would win. They're looking outside of equity markets too. So they're doing a lot in bond markets right now, in currency markets right now. And so for example, I was talking last week with Mark Dowding, he is at RBC Blue Bay, they're a huge asset manager, he oversees their fixed income and he was talking about how he is starting to position the portfolio toward a stronger dollar. He is putting on what are called curve steepeners, which is basically betting that the longer

end of the treasury yield curve will rise faster than the shorter one and is also betting on things like that inflation break evens will widen, which are essentially bond market measures of pricing pressures. Nat. Katelin, we are really moving away here from thinking about these as just narrow bets on individual companies that might benefit and much more towards larger predictions about what would happen after a Trump victory. Katelin.

Yeah, exactly. I mean, a lot of hedge fund managers that I'm talking to believe that Trump's policies will be quite inflationary, particularly when you're looking at significant tariffs on Mexico and China and other countries in general. And so a lot of those things like strong dollar inflation break evens, those are tied to an inflationary environment. And then you've also seen a lot of activity further out in markets. For example, there's been a lot of hedge fund activity around the Mexican peso, betting

against that. That's weakened quite considerably this month. And that's tied to Trump recently saying that he could impose 200 percent tariffs on vehicles from there. Halen, is it possible for us to say to what extent these bets represent a prediction Trump will win or just that there is a bit of a, I don't know, FOMO, could we call it, a belief that, you know, money would be lost if some of these investors didn't try to bet in some way on a Trump victory?

Yeah, you know, it's interesting. I asked a lot of these managers that I was talking to just about their own political beliefs and a lot of them at least told me that they had no preference. You also have had big hedge fund managers on television lately saying that they don't have preferences, but they're just trying to read the tea leaves and markets. And so I think a lot of what's happening here is just this FOMO that you talked about. And a lot of these hedge fund managers, they tend to be really hedged and really positioned. So even if they're entering a position that would benefit from a Trump victory, they're usually hedging that out in some other type of way.

So that's sort of the narrative that's taken hold in markets right now. But I don't think we can necessarily say it's predictive of what the result will be next week. I've been speaking to Wall Street Journal markets reporter Caitlin McCabe. Caitlin, thank you so much, as always. Thanks for having me. And that's it for What's News for Wednesday morning. Today's show was produced by Daniel Bach and Kate Bullivant with supervising producer Christina Rocca. And I'm Luke Fargus for The Wall Street Journal. We will be back tonight

with a new show. Until then, thanks for listening.