David Shapiro analyses market shifts and the “Trump bump”
With Trump's influence making waves in the U.S. economy, David Shapiro from Sasfin Wealth joins Alec Hogg to dissect how market dynamics are being reshaped. From deregulation benefits and small-cap growth to the electric vehicle slowdown, Shapiro explains the impact of Trump's policies and the forces behind key stocks like Tesla and Palantir
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In a recent discussion on BizNews, financial expert David Shapiro shared his thoughts on the evolving U.S. economic landscape under former President Donald Trump's influence. Speaking with Alec Hogg, Shapiro provided insights into why deregulation, shifts in small-cap investments, and high-profile stocks like Tesla and Palantir are stirring significant market interest.
Trump's policies have had a strong impact, and Shapiro suggests that the political climate has shifted consumer and investor sentiment. According to Shapiro, while it's tempting to credit the economy's performance to single issues like abortion rights or character controversies, it's ultimately economic factors that are shaping the American public's decisions. Rising prices and strained budgets among lower-income Americans have forced many to reconsider their political allegiances. "They were worried about immigration and safety," Shapiro explained, "so there were a lot of factors coming through which highlight how the Democrats just neglected or called it wrong."
One of Trump's primary appeals lies in his support for deregulation. Shapiro, a strong advocate of deregulation, believes it fuels economic growth by allowing large companies to thrive without excessive intervention. "I'm a great believer that large companies drive the economy," Shapiro emphasized. By fostering an environment where companies can freely allocate resources toward research and development, Shapiro argued that deregulation allows businesses to innovate, create jobs, and bolster the economy. In his view, deregulation is a big driver, especially in banking, where the freedom to use previously restricted funds can lead to greater economic expansion. This has had a clear positive impact on bank stocks and broader market confidence.
Additionally, Shapiro pointed out that smaller companies are benefiting from deregulation and favorable conditions, particularly through the Russell 2000, which is a leading index of small-cap stocks in the U.S. According to Shapiro, smaller companies are poised to take advantage of higher tariffs and excise duties imposed on imports, giving them a competitive edge. With less regulation and more opportunity, small caps have a brighter outlook, especially as lower interest rates are further stimulating economic activity.
The prospect of interest rate cuts from the Federal Reserve was another highlight. Shapiro acknowledged that while Fed Chair Jerome Powell has faced pressure from Trump to reduce rates faster, Powell's current pace is moderate yet supportive of growth. Lower interest rates not only make borrowing more accessible but also support an investment-friendly environment, which in turn fuels stock market gains.
Turning to the stock market, Shapiro commented on some notable trends, particularly the surge in "Trump stocks." Trump's alignment with business-friendly policies has led to speculation about potential collaborations, such as a rumored partnership between Trump's media company and Elon Musk's X, formerly Twitter. Though Shapiro remains cautious about whether such deals will materialize, he acknowledges that Trump's media ventures and Musk's influence carry undeniable momentum in today's media landscape. Whether the two forces ultimately come together, Shapiro noted, remains to be seen.
The conversation shifted to specific stocks, including Tesla and Palantir, which have seen impressive gains. Tesla's stock was up 33% for the week, and Palantir was up 42%. Shapiro's perspective on Tesla was nuanced, noting that while Tesla has become a technology powerhouse, it faces complexities under Trump's oil-friendly stance. "Trump wants to pump oil, which is not exactly where Elon wants it to go," Shapiro noted, highlighting the paradox in Tesla's growth under a Trump-aligned administration. Furthermore, Shapiro expressed concerns over the broader electric vehicle market, suggesting that initial enthusiasm has met some practical challenges, especially for long-distance travel.
Despite these challenges, Shapiro remained optimistic about Musk's involvement in AI and Tesla's broader technological assets, such as battery storage and autonomous vehicles. In Shapiro's view, Tesla's investments in AI offer significant growth potential, aligning well with the current market appetite for innovative technologies. Meanwhile, Shapiro expressed strong support for Palantir, citing its clear business model and significant role in the AI sector. "Palantir, I like very much," Shapiro stated confidently, adding that the AI market is still in its early stages and holds substantial promise for future growth.
In closing, Shapiro underscored the importance of market stability, especially concerning the Federal Reserve's independence. Despite Trump's influence, Shapiro believes the Fed's autonomy is vital for long-term economic health, particularly to avoid the pitfalls of unchecked spending and inflation. With Powell's term running through 2026, Shapiro remains hopeful that the Fed's cautious approach will continue to balance short-term gains with a sustainable, stable economy.
As Shapiro sees it, the U.S. market is ripe with opportunity, driven by deregulation, strategic shifts in small-cap stocks, and the rise of transformative technologies. Whether the momentum of these "Trump stocks" persists or gives way to new challenges, one thing is certain: the U.S. economic landscape is evolving quickly, and investors will need to stay nimble to navigate the changes ahead.
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