BUZZ Investing: Election Sparks 'Trump Trade' Rally

Trump's election win spurred market optimism, driving rallies in equities, crypto, and cyclical sector.

The U.S. presidential election on November 5, 2024, proved to be a pivotal event for financial markets during the recent period between index selection dates (October 10, 2024 – November 21, 2024, the “Period”). Donald Trump secured victory, winning all key swing states and consolidating a strong mandate. This decisive outcome alleviated much of the political uncertainty that had weighed on investors. The so-called ‘Trump trade’ ignited a rally in specific sectors like financials, energy, and industrials, which were perceived as primary beneficiaries of pro-business policies and deregulation. Bank stocks climbed sharply on the expectation of a lighter regulatory burden, while small-cap stocks gained momentum as investors anticipated tax reforms and investment-friendly policies. These sector-specific moves reflected targeted enthusiasm for the administration’s policy outlook and its perceived alignment with corporate growth objectives.

More broadly, the election results fostered a wave of market optimism, contributing to a significant rally across major indices. Investors interpreted the mandate as a signal for increased fiscal stimulus and robust economic growth, lifting cyclical sectors and reinforcing a risk-on sentiment. Cryptocurrencies also experienced extraordinary gains, with Bitcoin surging 48% during the Period. This rally was driven by hedging against inflation concerns and renewed confidence in potential regulatory clarity for digital assets under the incoming administration. Adding to the market’s momentum, the Federal Reserve cut interest rates by 25 basis points on November 7, reinforcing an accommodative monetary stance. This combination of reduced uncertainty, policy optimism, and supportive monetary conditions led to a sharp decline in expected forward market volatility, with the VIX index dropping over 30% to fall below 15. The BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index”) performed well in this environment, gaining nearly 9% during the Period.

The BUZZ Index returned 1.32% during the month of October compared to a return of -0.91% for the S&P 500 Index during the same period. Year-to-date, the BUZZ Index lags the S&P 500 with returns of 16.63% and 20.97%, respectively, as of the end of October.

Shares of tech and crypto stocks lead gains in the BUZZ Index

During the recent Period, MicroStrategy Inc (NASDAQ: MSTR) emerged as the largest contributor to BUZZ Index returns, with its share price surging 78.7%. The company’s performance was closely tied to Bitcoin’s 48% rally, as investor enthusiasm for cryptocurrencies bolstered MicroStrategy, the largest corporate holder of Bitcoin. SoFi Technologies Inc (NASDAQ: SOFI) also contributed significantly, with its stock climbing 55.3%, reflecting positive sentiment around its growing financial services platform and the broader market’s appetite for innovation-driven companies.

Tesla Inc (NASDAQ: TSLA), another major contributor, rose 30.3% during the Period, benefiting not only from its strong market position but also from its perceived alignment with the incoming Trump administration. CEO Elon Musk’s public support for Donald Trump during the campaign and Tesla’s potential to gain from pro-business policies, including regulatory rollbacks and infrastructure investments, drove investor optimism. Other top contributors included Coinbase Global Inc (NASDAQ: COIN) (+69.7%) and Palantir Technologies Inc (NYSE: PLTR) (+36.0%), underscoring the strength of technology and cryptocurrency-linked sectors during a period of heightened market enthusiasm.

Top BUZZ Index Contributors: October 10, 2024 – November 21, 2024

Super Micro Computer leads declining stocks in the BUZZ Index

During the recent Period, Super Micro Computer Inc (NASDAQ: SMCI) was the largest detractor from BUZZ Index performance, with its stock declining 61.2%. The drop followed the resignation of Ernst & Young as its auditor, citing concerns over transparency, internal controls, and governance practices. This development, combined with lingering scrutiny from a recent short-seller report alleging accounting irregularities, may have undermined investor confidence and prompted a significant sell-off.

Lucid Group Inc. (NASDAQ: LCID) also weighed on the index, with its shares declining 37.5%. This could potentially reflect persistent challenges in the electric vehicle sector, including rising competition and demand uncertainties. Advanced Micro Devices Inc. (NASDAQ: AMD) and Micron Technology Inc. (NASDAQ: MU) further detracted from performance as the semiconductor sector faced headwinds that may have included inventory overhangs and softening demand in certain markets.

Bottom BUZZ Index Contributors: October 10, 2024 – November 21, 2024

BUZZ Index November 2024 Rebalance Highlights

Reddit, Inc.
Reddit (NYSE: RDDT) has firmly established itself as one of the world’s most popular social media platforms, known for fostering long-form discussions and high levels of user engagement. Unlike platforms dominated by short-form or video content, Reddit distinguishes itself through in-depth exchanges of ideas and media, offering a unique and immersive user experience. Its cultural and financial influence was amplified during the 2021 ‘meme stock’ frenzy, where it played a pivotal role in mobilizing retail investor interest. The company’s highly anticipated March 2024 IPO, the second largest of the year, underscored its growing popularity and cultural significance. Since going public, RDDT shares have nearly tripled, including a more than 50% surge since late October, driven by a robust Q3 report that surpassed revenue expectations, highlighted strong user growth, and marked the company’s first profitable quarter. These results bolstered investor confidence in its business model and may have supported the surge in positive investor sentiment. RDDT debuts in the BUZZ Index this month with a 1.1% weight.

Crypto Sector.
The U.S. presidential election on November 5 brought resolution to one of the most turbulent political cycles in recent memory. While polls showed a razor-thin race between Harris and Trump, betting markets had placed Trump’s chances of victory at around 65%. His decisive win, though unexpected by some, provided financial markets with much-needed clarity and stability. One of the clearest beneficiaries of the election outcome was the cryptocurrency sector, buoyed by expectations of a pro-crypto stance from the incoming administration and newly elected congressional leaders. Bitcoin rallied nearly 47% during the Period, driven by optimism over regulatory support and increased adoption potential. The surge extended to crypto equities, with Coinbase (NASDAQ: COIN) leading the pack. Shares of the U.S.’s most prominent crypto exchange soared almost 70% during the Period, fueled by rising sentiment tied to favorable policy expectations and the broader market’s enthusiasm for digital assets. Positive investor sentiment on COIN rose sharply, making it one of the largest sentiment gainers this month and moving it to a maximum weight position in the BUZZ Index.

Originally published November 25, 2024.

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