What a difference two weeks can make. It’s only really been that long since the outcome of the US presidential election. The capital markets reflexively flipped the switch.
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On Wall Street, the so-called “Trump trade” was played out, which also affected Big Tech. The “Magnificent Seven” shares (Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta and Tesla) initially rose largely in line with the market trend, as stock market participants tended to expect less regulation from a Trump administration and a Republican-dominated Congress and House of Representatives. Antitrust proceedings were all opened against Alphabet, Meta and Apple under the Biden administration, which could now have a different outcome in the Trump 2.0 era.
Tesla and Elon Musk are the biggest beneficiaries of the Trump election
Meanwhile, Tesla emerged as the real profiteer among the Big Techs. Elon Musk’s alliance with Donald Trump immediately paid off on Wall Street in dollars and cents. In figures: The electric car pioneer, which is responsible for the lion’s share of Musk’s wealth, has posted massive gains in value since election night, by 31 percent within a week.
At its peak, it was even a huge 43 percent, namely an increase from 250 to almost 360 dollars at its peak. The result: Tesla managed to increase its market capitalization by an enormous 300 billion dollars within a week to a stock market value of over one trillion dollars again – and thus made a comeback to the ten most valuable companies in the world.
Musk’s campaign donations pay off
Of course, Elon Musk himself has also benefited. The exorbitant growth of Tesla made the richest man in the world more than 60 billion dollars wealthier at its peak. Elon Musk’s net worth is now estimated by Forbes at 318 billion dollars – wafer-thinly below his record figure from 2021. Musk still owns 13.4 percent of Tesla.
For the omnipresent marketing professor and big tech commentator Scott Galloway (“The Four”), Musk’s campaign support for Trump, which is estimated at $119 million in donations over a period of three to six months, is already “the best trade of 2024” or “one of the best investments ever”.
In his podcast “Pivot” with Kara Swisher, Galloway further commented, “If someone were to say to a billionaire or an institution or a hedge fund, ‘Here’s $119 million, if you give us $119 million, we think there’s a two-thirds chance you’ll get $15 billion back’ – you have to give them credit.” In his podcast immediately after the election result, Galloway referred to the increase in Musk’s net worth, which has since continued to rise in value in sync with the sale of Tesla shares.
Winners and losers of Trump 2.0
The other asset that has been in high-flyer mode since Trump’s election victory is, of course, Bitcoin. During the election campaign, Donald Trump made several very positive statements about cryptocurrencies – and Bitcoin in particular – and declared that he wanted to set up a strategic national Bitcoin reserve, similar to gold. This is likely to mean that the US government will acquire significant amounts of Bitcoin to hold it as a strategic asset.
As a result, the world’s most valuable cryptocurrency has boomed massively, rising from below 70,000 to new all-time highs of 94,000 dollars since election night. However, it was not only cryptocurrencies that recorded massive price gains, but also the technology companies that provide the platforms. These are either trading platforms such as Coinbase, neobrokers such as Robinhood or fintechs such as Block (formerly Square) from Twitter founder Jack Dorsey.
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On the losing side, on the other hand, Chinese internet and technology stocks have been selling off almost without pause since election day due to the prospect of high import tariffs on goods from the Middle Kingdom in the second Trump administration. The significant gains made by Alibaba, Tencent, Baudi, Pinduoduo and JD.com at the start of the fall have now almost completely evaporated.
“Trump trade” turns negative – Inflation concerns weigh down
However, in recent trading days, tech shareholders have had to witness just how quickly trends can turn again, even in their entirety. The “Trump trade” was reversed, at least across the board and especially for big tech – Virtually all the “Mag 7” except Tesla gave back their gains after the Trump election.
The trigger for the most recent price losses in recent trading days was a new, previously underestimated variable: the possible return of inflation. A more lax, capital market-friendly policy could indeed boost economic growth in the coming years, but this could reignite the prospect of price rises – and thus nip hopes of more extensive interest rate cuts in the bud. The adage that “political stock markets have short legs” has thus proven true once again.
(dahe)