#554: The Most Expensive Election Trade Ever Made (A Cautionary Tale)

The U.S. jobs market hit a surprising speed bump in October, adding just 12,000 new jobs — way below the expected 100,000.

A mix of natural disasters and labor unrest explains the slump. Recent hurricanes in the Southeast wiped out somewhere between 40,000 to 70,000 jobs, while strikes at Boeing and other companies added to the slowdown. Against this backdrop, the Federal Reserve looks ready to cut interest rates next week by 0.25 percent.

Meanwhile, gold is having its biggest moment since 1979, but not for reasons you might expect. Central banks, especially in China and India, are loading up on physical gold like never before. Poland’s central bank has grabbed 167 tons of gold and wants to keep 20 percent of its reserves in gold — a move that hints at banks preparing for possible global shake-ups.

Remember when I-Bonds were the hot ticket in 2022, paying out 9.6 percent? Those glory days are gone. The new rate has dropped to 3.1 percent, making your standard high-yield savings account look pretty good in comparison.

In the stock market, it’s all about the “Magnificent Seven” — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla. These tech giants account for 62 percent of all S&P 500 gains over the past year. The other 493 companies aren’t doing too shabby either, with profits expected to grow 13 percent next year.

As for the upcoming election, both presidential candidates’ economic plans would push the federal deficit higher. The Wharton School of Business says Trump’s proposals would add $5.8 trillion to the deficit over 10 years, while Harris’s would add $1.2 trillion. There’s also talk about tariffs that could spark inflation and maybe even kick off a global trade war.

Here’s the kicker: during the 2016 election, a 24-year-old Sam Bankman-Fried correctly predicted the outcome before anyone else and made $300 million in a single night trading on that information. But by morning, the markets had swung so wildly that he’d lost $600 million.

The lesson? Even if you guess the election right, predicting how markets will react is a whole different ball game — one that you should avoid. Think long-term, buy-and-hold.

Timestamps:

Note: Timestamps will vary on individual listening devices based on dynamic advertising run times. The provided timestamps are approximate and may be several minutes off due to changing ad lengths.

0:00 October jobs report falls short

3:42 Fed signals likely 0.25 percent rate cut next week

8:15 Gold prices surge to 45-year high

12:30 China and India lead global gold buying spree

18:45 I-Bond rates plummet from 9.6 to 3.1 percent

24:10 “Magnificent Seven” tech stocks dominate market gains

29:35 US economy outpaces Germany, other G7 nations

35:20 AI’s transformative impact on Generation Alpha

42:15 Inflation risks and tariff concerns ahead of election

48:30 US deficit hits 6 percent, tops G7 countries

52:45 Wharton analyzes Harris vs Trump economic plans

58:20 SBF’s $600M election night trading disaster

Resources Mentioned:

Wharton’s Trump Campaign Economic Analysis | Website

Wharton’s Harris Campaign Economic Analysis | Website

The Economist, Editorial Board Endorsement | Website

Bloomberg Endorsement | Website

The Financial Times (behind a paywall)  | Website

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