Shapiro: Global financial markets wary of political shifts as U.S. elections approach

In an interview on this morning’s BizNews Briefing podcast, Sasfin Wealth’s chief investment strategist David Shapiro and BizNews editor Alec Hogg discussed the U.S. political climate, specifically concerns over a potential Republican “clean sweep” under Trump, Musk’s alignment with Trump for business gains, and market volatility driven by tech short squeezes and inflationary pressures from U.S. tariffs. NB Some clarity on the US governance structure from John Matisonn at the bottom of the page…..

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BizNews Reporter ___STEADY_PAYWALL___

The world is watching with bated breath as the U.S. presidential election looms, particularly with the spectre of a Trump presidency returning. David Shapiro, Chief Global Strategist at Sasfin, recently joined Alec Hogg of BizNews Briefing to discuss potential impacts on global markets if Republicans were to secure control over the U.S. presidency, House, and Senate.

A “clean sweep” by Republicans, which Shapiro describes as one party holding the presidency, Senate, and House of Representatives, could enable the unchecked implementation of policies, some of which could heavily impact both domestic and international markets. As Shapiro explained, “Trump can go mad,” referring to the potential for extreme and unmoderated decisions under a unified government.

Musk, Celebrities, and Potential Advisors

While the atmosphere surrounding the U.S. election has grown increasingly polarized, the potential role of influential figures like Elon Musk has raised eyebrows. Shapiro noted that Trump appears to be courting support from high-profile personalities, including Musk, possibly to align his policies with the business magnate’s interests.

Shapiro joked about the contrast, saying, “You’ve got Beyoncé and Taylor Swift versus Hulk Hogan and Elon Musk,” underscoring the stark contrast in celebrity endorsements aligning with each political camp. Yet, despite the humour, there are significant implications for the markets, especially given Musk’s stake in government contracts through companies like SpaceX.

With Musk involved, certain sectors could see direct benefits, particularly those involving technology and defence. Musk’s diversified business interests, from electric vehicles to space exploration, align with Trump’s pro-business stance, and Musk has substantial assets in China that could put him in a unique, yet precarious, position. Shapiro expressed concern over Musk’s unpredictable nature, remarking, “I worry about those kinds of characters who you can’t read from day to day.”

The Security Risks of a Trump Presidency

Concerns extend beyond economics and into national security, according to Shapiro, who referenced insights from retired General Wesley Clark. Clark, who previously served as NATO’s Supreme Allied Commander, has publicly voiced apprehensions regarding Trump’s impulsive nature, labeling him as a “security risk” given his tendency to be swayed by the “last person who gave him advice.”

For many in the international community, including South African investors, this adds an unsettling layer to potential U.S. leadership changes. Trump’s alliances, notably with Russian President Vladimir Putin, raise geopolitical risks that could affect markets worldwide. “Putin will love it,” Shapiro noted, alluding to Clark’s comments that Putin could exploit U.S.-China tensions to his advantage.

China’s Market Maneuvers

Shapiro and Hogg also discussed the reaction from China, which has recently been forging closer alliances with U.S. allies, including the European Union, Japan, and the United Kingdom. This strategic outreach could signal China’s efforts to secure alternative trading relationships in the event of a Trump victory and a potential escalation in trade restrictions or tariffs.

The shift comes as Chinese officials anticipate more adversarial U.S. policies under Trump, should he take office. For investors in South Africa and other parts of the world, the uncertain outcome of the U.S. election thus holds implications far beyond American borders, particularly in terms of supply chains and investment portfolios that are closely tied to both U.S. and Chinese markets.

Volatility and Policy Impact on Markets

Shapiro pointed to market volatility as an indicator of broader economic jitters, which he attributes to Trump’s unpredictable policies, including tariff hikes and potential tax cuts. These actions, he explained, would be highly inflationary. The challenge, according to Shapiro, lies in Trump’s focus on tariffs aimed at forcing companies to produce domestically, a policy that overlooks the time and resources required to bring such initiatives to fruition.

“America hasn’t got the capacity to fulfill what they import,” Shapiro explained, noting that manufacturing relocation would likely take years. “You can’t just overnight say, ‘Let’s build a factory.’” If tax cuts were implemented alongside tariffs, inflation could surge even more. Furthermore, reduced taxes without sufficient revenue sources would inevitably increase U.S. debt.

Tesla and Tech: The Power of a Short Squeeze

Tesla’s recent stock surge, despite results showing less-than-remarkable revenue growth, also came under discussion. Shapiro highlighted the phenomenon of a “short squeeze,” where investors who had bet against the stock, expecting it to fall, were compelled to buy it back at rising prices, thus inflating the stock further.

This event underscores how speculative movements often override fundamentals in tech stocks, something Shapiro linked to the broader trend of market volatility. Alec Hogg noted that even those with substantial experience, like Cy Jacobs, a notable investor, have been caught off guard by the unpredictable nature of tech valuations. Shapiro summed it up with a quote from economist Howard Marks: “There are so many people in financial markets who’ve made their reputation for getting things right once in a row… be careful.”

South African Retail and Casino Markets: A Comparative View

The conversation shifted briefly to South African markets, particularly retail and casino sectors. Shapiro described Dis-Chem’s growth from a small local chemist into a national brand, applauding its solid performance even if the results fell slightly short of analysts’ expectations. On the casino front, however, he expressed doubt about the Competition Commission’s approval of Sun International’s bid for Peermont, explaining that a merger of two of the three largest players in South Africa could skew market dynamics.

He suggested that the consolidation of power within the casino industry would likely encounter pushback, especially as consumers shift towards online sports betting. “The emperor, Monte Cassino, Grand West… that’s where the money’s being made,” Shapiro concluded, indicating that demand has shifted away from smaller, rural casinos in recent years.

Outlook for International and Local Investors

Shapiro’s insights highlight both opportunities and risks for investors as they navigate the uncertainties surrounding the U.S. election and its international ripple effects. While the headlines of a Trump candidacy and Musk’s political involvement may capture public attention, Shapiro advises that these stories are part of a larger, complex financial landscape in which investors must exercise caution.

MATISONN SETS THE RECORD STRAIGHT….

BizNews columnist John Matisonn writes:

Just watched your interview with David. I enjoy listening to him, BUT:

The US does not elect half the House and half the Senate every two years.

The facts: The US elects ALL of the House every two years and one-third of the Senate. That is so that House representatives each have two-year terms, and Senators have six-year terms.

This means that the Senate’s direction in any particular year depends substantially on the particular mix of senators up for grabs in one cycle. In this cycle, two Democrats in very Republican states are up. One has retired—Joe Manchin of West Virginia—so that will almost certainly turn Republican, and Tester in Montana, who could lose.

The bottom line is the Senate could flip from Democrat to Republican, though there are a few anomalies that could affect that. The current mix is 51 Democrats and 49 Republicans. Of course, if it is 50-50 by chance, the tie-breaker is the vice president.

The House of Representatives is currently Republican by a few seats. If the election is close, Republicans could maintain control. However, several seats in New York were won as a result of the Democratic Party’s strategy last time and could flip.

So, it’s possible that the Republicans could win the House, Senate and White House.

It’s also possible that the Senate will flip Republican and the House will flip Democratic.

This has almost never happened, like so much else these days..

Incidentally, the House has special budgetary powers. The Senate has sole control over approving judges and cabinet posts.

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