Big Picture: Investing in a Trump Economy

January 24, 2025 – In today's Big Picture episode of the Financial Sense NewsHour, Jim Puplava and Cris Sheridan discuss how to invest in a Trump economy. They highlight the significance of the political component in shaping market and economic outlooks, given the radical shift in policies under the Trump administration. Jim Puplava emphasizes that Trump is one of the most business-friendly presidents in decades, comparing him to Ronald Reagan. They explore key sectors such as tech and AI, energy, precious metals, and consumer sectors that are expected to flourish under Trump's policies.

Druckenmiller's insights into small business sentiment and the potential for the US to dominate the crypto industry are discussed. The conversation also touches on the investment implications of the "Drill, Baby, Drill" campaign, the potential lowering of the US dollar, and the importance of precious metals as a hedge. Additionally, Jim Puplava shares his cautious approach in recent weeks, raising cash ahead of market corrections, and discusses the opportunities in the small and mid-cap space despite high valuations in the broader market.

Listen to the full episode for a deeper dive into these topics and to understand how Financial Sense Wealth Management is navigating these trends.

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Transcript

Cris Sheridan:
Welcome everyone to today's Big Picture edition of the Financial Sense Newshour. Today we're going to be discussing how to invest in a Trump economy. And as we discussed last week, the three-legged stool that we use for analyzing the markets and the economy is to look at first the fundamentals, secondly the technicals, and thirdly, the politicals. And the political component, we believe this year is going to have a significant influence on both the market and economic outlook, given how radical a shift we're seeing in terms of the policies that will be implemented. So there are some big changes, of course, that happened even just this week with a flurry of executive orders and a number of decisions that have been made.

Jim Puplava:
Cris, this is probably the most business-friendly president in my lifetime. You would probably have to hearken back to Ronald Reagan. When he came in, he lowered the estate tax rates. And remember, by the end of Reagan's presidency, he had brought the tax rates down from 70% down to 28%. They didn't stay long at 28 because Bush Senior raised them to 31 and then of course, Clinton raised them up to 39.6. But in terms of regulations, tax rates, probably one of the most business-friendly presidents we've probably seen in over four decades. And it's not going unnoticed on Wall Street and in the market.

Cris Sheridan:
Yeah. Here's what legendary hedge fund manager Stan Druckenmiller recently had to say in an interview with CNBC.

[Audio clip]

Jim Puplava:
I mean, if you just take a look at some of the things that we've seen happen since the election, we had the announcement by Stargate, which will invest $500 billion for AI. And let me just clarify that $500 billion, it's not going to happen in a year. It'll probably happen over the balance of the decade in building these new data centers that are going to power this AI in the cloud. So we've seen companies that are bringing factories back, Samsung is closing its factory in Mexico, bringing it to the US and then also the tax incentives. And we assume that the Trump tax cuts are going to get extended. And he's talking about a couple other things, not taxing Social Security, not taxing tips, whether all of that's going to get through in one bill or it's going to take time. But nonetheless, creating tax incentives and then also equally important is the removal of regulations that are not only costly but hinder economic activity. And I think that's where you're seeing a lot of relief from businesses. I mean, I just take a look at what we've gone through as a financial industry, all the regulations that we have to go through in just the last four years. So removing some of that. Druckenmiller talked about small business sentiment. Major pop. And you got to remember the majority of jobs in this country are created by small businesses. So these are everywhere from mom and pop businesses to small C Corps and small S corps that create the jobs in this country. He's talking about the US to dominate the crypto industry. That's big. Saudi Arabia just announced they're going to invest $600 billion in the US and Trump is talking about getting them to boost that to $1 trillion. I mean, you take a look at the sectors that are going to get hit by and flourish under this administration, AI, technology, industrials, crypto, a large segment, Cris, of the market have gone through major corrections. And one of the things that we're seeing is, you know, everybody's been focused on the S&P dominated by the MAG7. There's 493 other stocks in the S&P 500. And many of these stocks have gone through their own bear markets. And I'm talking about down as much 30, 40 and 50%. I mean, we're like a kid in a candy store. We're finding high dividends, low PE stocks. You know, I've got five or six stocks in the portfolio that are paying anywhere from 6 to 8%. And unlike a fixed income or a bank account or a T-bill, it doesn't stay at 6 to 8%. Those dividends go up each year. And not only that, you pay a lower tax rate. And I'm just reading this because this is important because I'm sure a lot of our listeners right now are looking for their K-1s, their 1099s to file their tax return. But here's something that you need to keep in mind. If you're single, you pay zero on capital gains and dividends up to $48,350 of income. If you're married, you pay zero on capital gains and dividends and on total income. And I want to clarify that that's total income from dividends or capital gains, not your tax rate. So if you're in that bracket of total income, $48,000 if you're single and $96,700 if you're married, you pay zero capital gains. Now if you are single, the 15% tax rate applies from $48,351 to $533,400. You're only paying 15%. If you're married, it goes from $96,701 to $600,050. Now I got to throw a caveat in there because there's the Obama tax and the Obama tax is 3.8%. It applies to capital gains and dividends when you make $200,000 or more if you're single and $250,000 if you're married. So instead of 15% you'll pay 18.8, but that's better than 37.6 plus the Obama tax at 3.8, which puts you almost at a 42% tax rate. So basically dividends and capital gains, you have this incentive to invest for capital gains and for dividends because they're taxed at a much, much lower rate. Do you want to pay 32, 35, 37% tax rates or those of you in a real high brackets up to almost 42 or do you want to pay 18.8? I'll take 18.8 every day of the week. Yeah.

Cris Sheridan:
And so like we discussed last week, if you look at the broad market averages, valuations are high for the stock market as a whole, but that's large due to the high valuations that we see within that MAG7 of which the S&P, the Nasdaq of course is largely concentrated. So that is lifting the valuations for those broad market averages due to the tech sector. However, if you look at those other 493 stocks and do a bottom-up analysis, there's still some great opportunities there. And if you remove those seven stocks out of the S&P 500 or if you look for example at the small to mid-cap sector, you're seeing reasonable valuations and stocks that also pay very good dividends. So there are still here risks and opportunities. And as we've discussed in the past, there's a lot of different ways in which investors can participate in this dominating theme of artificial intelligence. Of course, because there's a lot that goes into it. It's not just the software component. The, there's also the building of the data centers, there's the power, the electrification. So there's many angles to this.

Jim Puplava:
And Cris, that's one of the reasons we see a lot of opportunities. We see four or five sectors. Let me begin with tech and AI. I mean we talked about Stargate $500 billion in terms of AI investment. I mean it's non-stoppable in terms of its impact from apps that you're going to see to applications in business. I mean we're already, we've been using AI in our business for the last two years and we're going to be using it even more. You're going to see more applications, whether it's Microsoft Teams to Copilot and other programs. You're seeing it in research. They're even talking about, you know, with this kind of data and AI, we may even see a cure for cancer. And on top of that, AI, we see opportunities. What does AI need? AI needs infrastructure. AI needs electricity. You need electricity to power those data centers. How are you going to get the power? And one of the problems that you have, it requires so much energy. A lot of politicians and states are concerned about the cloud and AI taking away from the grid. And now they've come up like Elon Musk. He, he built one of the largest data centers in the world, and he powered it. He built two natural gas plants within three months and it's up and running. So we're very big on electricity utilities that will power these data centers. They're located in about seven states. There's natural gas power plants. Another thing we talked about bringing, and this actually took place in the first Trump administration and bringing manufacturing back to the US and we saw the problems that we had with supply chain that came in with COVID. So more and more companies are coming back. Trump is going to make the incentive for them to do so. He's talking about a tax rate of 15% for those that manufacture here. We just saw that Samsung is closing a plant in Mexico, bringing it to the US. Saudi Arabia is going to be investing $600 billion in the US now, whether that's going to be in energy, we don't know yet. But robotics, because we're going to have to compete with companies around the world, we're going to have to compete with China, we're going to have to compete with Asia. So if you bring these factories back, I grew up in Phoenix, Arizona, and if you take a look at Taiwan, Semiconductor is building their second plant there. Largest in the world. Intel's building a plant there. Apple's building a plant. What is going to make us competitive? Very big on robotics. And folks, this may sound crazy, but you may, instead of a housekeeper, you may have a robot in the next three to five years. I know we're looking at getting one for the office. So robotics for manufacturing and automation, drones for delivery. It's not too far away. In the next couple of years, you may call in a prescription to CVS or Walgreens and you're going to find a drone, will deliver it and drop it on your doorstep. Amazon is talking about making deliveries with drones. And not to mention the Military is shifting. We saw this in the war with Hamas where they basically flew these drones, 405, $800 drones, and you know, we're shooting a million-dollar missile against that. So you're going to see drones take off or use them. We're developing a drone that can land and take off and deliver bombs off aircraft carriers. So warfare is going to be changing with drones. We're talking about, everybody is familiar with Uber or what about a driverless Uber. That's going to, you're going to see that in the next couple of years. So there's a lot of exciting things that are coming. Cris, this, the AI thing is probably going to be the biggest thing that we've seen since the Internet.

Cris Sheridan:
Yeah. Regarding Project Stargate, President Trump has said that this is going to be the largest AI infrastructure that we've seen in history. And if that's true, if we do see the building of what has been proposed now to be 10 to 20 different data centers around the US, which could be, you know, up to half a million square feet or more, as we've discussed on our show in the past with Mark Mills, Robert Rapier and others. I mean, these data centers require anywhere from 100 megawatts, 150 megawatts or more. That's tens of thousands of homes worth of electricity. So this is a whole ecosystem that is coming together in a very fascinating way. And if there is continued government support behind that in this AI arms race, really against China, that creates a very interesting setup. Another part of the big change that we've seen now going from a Biden administration to Trump administration is the remarks that have been made both by Trump and by J.D. Vance regarding the US dollar.

Jim Puplava:
Yeah, I definitely see a lower dollar in the next couple years and it's going to be brought about by debt. And you're going to see not only just a lower dollar, you're other currencies that are, you know, it's, it's a race to the bottom. Who gets there first. But so you need a dollar hedge in all of this. We saw this in the last decade and you'll see it in this decade. So, you know, you need a hedge. Where do you find a hedge? Precious metals, gold and silver. Gold is resuming its role as a currency of choice. It's being used by the BRIC countries in terms of settlement of currency and trade. You know, people forget that since 2019, gold is up 90%, silver's up over 130%. And Cris, I've never seen a period of time where precious metal companies are under-owned, unloved and undervalued. I mean in contrast to the 2000 decade where companies were paying ridiculous prices to buy other companies, the mining companies are more disciplined. They've had to go through hard times the last decade where you saw gold get all the way down to $1100 from $1900. And so you take a look at almost $2800 gold now and you're talking about silver over $31. These companies are going to be printing money. And so, you know, we like the precious metal stocks. We've been in them since 2019. And we also ask, we like crypto. I mean that's one of our best trades. We've been in crypto since the summer of 23.

Cris Sheridan:
Yeah, speaking of bitcoin, Jim, right now as we're speaking, it's touching just under $107,000. So I believe that would be a new all-time high. Actually getting close to it because bitcoin did get to about $108,000 previously. So again we're, we're touching those all-time highs on bitcoin once again.

Jim Puplava:
Yeah, like I said, this has probably been one of our best investments probably over the last year and a half. And so the point is the dollar is going to be going lower. And this is not just the US dollar. You're going to see that with the euro, you're going to see it with the yen, you're going to see it with the Chinese renminbi. So all of these currencies are depreciating because we're operating under a fiat system. Now another sector that we think is going to do well is consumer sector. I mean you take a look at some of these consumer companies and I'm talking about blue-chip companies are down as much as 40 to 50%. A large population of these companies are blue-chip companies that have been beaten up that will be rebounding. And if we talk about lower tax rates, job creation, there's going to be more money to spend. So let me put a caveat on that. They'll be spending more money. The dollar we think will be going lower, but also we also think that inflation will be going higher. So we like a lot of these companies, I mean we are finding dividends in the, like I said, four or five all the way up to 8%. I've got five in the one of the portfolios I manage that are paying yields of six and a half to over 8%. I mean if I could get 60, 70 and 80% of the long-term return on the stock market and have that, unlike a fixed income investment, have that income go up each year and I pay either 0 or 15 or 18% tax. I'll take that every day of the week.

Cris Sheridan:
Now along those lines, we just spoke with Robert Rapier and he's an energy analyst and we talked about some of the investment implications of "Drill, Baby, Drill." When we think about the energy infrastructure that's going to be required to power a lot of these energy behemoths of data centers that we're going to be continuing to build, what are your thoughts? Obviously, you watch the energy space very closely. What are your thoughts on the "Drill, Baby, Drill" campaign that we're going to be seeing over these next four years?

Jim Puplava:
Well, you know, as I mentioned at the top, you know, we have the IEA and the EIA have consistently over the last 10 to 15 years underestimated the demand for energy. Anytime you see the price of energy pop, they'll come out with some kind of report that says, hey, oil prices are going to go down, demand is falling and only to be followed up the following year and they had to revise their estimates up. So you know, Trump revoked the EV mandate. And Cris, we're going to be using oil and natural gas for the next 30, 40, 50 years. So we're not, you know, this idea that by 2030 we're all going to be driving EVs and everything's going to be powered by windmills and solar. That's not going to happen. We're still going to be using gasoline-powered cars. We're still going to be using diesel-powered trucks, jets that go on jet fuel, boats that go across the ocean, deliver goods to us with diesel fuel. So we like the energy sector. And one of the things that he's going to be doing, he's talking about opening up ANWR, which has a vast amount of reserves. Heck, in California, right off the coast of Santa Barbara, the oil is so thick it seeps up on the beaches. So we know we have 6 to 8 billion barrels of oil there. In ANWR, it could be even as big as the Permian. You know, time will see what will happen. But opening up ANWR, he's also going to allow, and this is strategic in terms of trade, he'll allow US companies to sell LNG to Europe where they can earn two to three times what they get in the domestic market. And as I mentioned, the EV mandate has been repealed. And Cris, you cannot have economic growth without energy. It takes energy, whether it's trucks, cars on the road, planes in the air, ships across the ocean, or it's all the goods that we make from oil. I think we put a chart up. I think there's like 5,600 products that we make. Everything in your home comes from an oil base, whether it's the stain on the cabinets, your tile, your flooring, your roofing. All those things are derivatives of oil, pharmaceuticals. I could go on and on. So energy drives the economy. You can't have economic growth without energy. And so we're big on energy. So the things we like are energy. We like the beaten-up consumer sector. We think that the consumer discretionary income can increase with job creation and growth. We also like the precious metals as a hedge against the dollar and we also like technology.

Cris Sheridan:
Now, Jim, in recent weeks and perhaps over the past month or so, you've been more on the cautious side, and of course, even Chris as well, our CIO discussing how we'd raise some cash ahead of the last correction. Where do things stand today?

Jim Puplava:
Well, you know, we take a look at it. We raised some cash going up into the election because I mean, nobody knew where the election was going to be. It surprised us as it surprised the rest of the country. I mean, what he accomplished, everybody admits it's one of the greatest political comebacks in US history. So what we're positioned now for is, is we're positioning for a Trump economy. What are the sectors? What is the economy? What are the things that are going to do well in a Trump administration versus a Biden administration or Obama? So we already mentioned the sectors we like: consumers, especially the companies that have been beaten up. We like energy, we like precious metals, and we like technology, especially robotics, drones, AI, anything to do with it. And we also like electricity. You know, some of the things that we haven't seen that are now, I mean, utilities were widows and orphan stocks. They were boring. They didn't grow. You got a dividend that went up maybe 1 to 5% a year. Now you're taking a look at electricity growth, utility growth. Utilities are now growing at 2 to 3% a year. And Cris, we haven't seen that in over three decades. So I mean, this is going to be a transformational economy and it's going to be driven by pro-growth policies coming out of Washington that encourage business formation, that encourage economic growth instead of stifling it. And that's what Druckenmiller was talking about. But it's going to be more of a stock picker's market. It's not going to be, I'm not sure investing in an index fund with the MAG7 is going to be the best place to be. And I think there's opportunities here in a safer way to play it. I mean, like I mentioned, if I can get 60, 70, 80% of the long-term return of the stock market in a dividend that goes up each year, that's taxed at 15 to 18%, I'm going to take that every day of the week.

Cris Sheridan:
You know, Jim, you were talking about how Trump made another big surprise here and basically came back from the dead, so to speak, by winning the election, the popular vote. That was a big surprise to people. And of course, we're going to see some big policy changes now because of that over the next four years. There was a very interesting quote that came from one of the speakers at the World Economic Forum that just wrapped up. I want to play that because it just gives an idea of how international observers are discussing the Trump win and just how much of a surprise it was. Listen in to what he had to say.

[Audio clip plays]

Jim Puplava:
So, you know, even the elites at Davos are admitting this was quite a comeback and it signals a global economic change.

Cris Sheridan:
And as one of our guests recently said on FS Insider that will be airing next week, he said that the election of Trump, a Trump 2.0, where he's going to be doubling down now, you know, he attempted to implement some of these policies in his first term, was not nearly as successful. But now he's obviously appointed certain people around him that are going to be able to align with his vision and his policy approach. So as the World Economic Forum here was saying, he's going to double down and he's going to be even more forceful in implementing those things. We've already seen that just this first week with a flurry of executive orders. I think it's what, over a thousand arrests of various criminals, illegal immigrants, gang members throughout the country in sanctuary cities. So he is going in with all guns blazing and we should expect to probably see that take place in the markets and in the economy over the months ahead. So as we conclude, I think the big picture here as we painted is that even though, yes, markets are overvalued, when you look at the US stock market, the S&P 500, the NASDAQ, of course, those being largely inflated by the MAG7 Big Tech stocks, there's still going to be a lot of policy support for further building out this AI arms race against China. If you buy into the idea that the stock market is in a bubble, bubbles can go a lot further than what you expect. However, even if that is true, there are still opportunities in the small and mid-cap space, other sectors where you can participate in these trends. And that's what we're doing at our company, Financial Sense Wealth Management. So if any of you are interested in coming on board, learning how we can assist you with our comprehensive financial planning or asset management services, you can always give us a call at 888-486-3939 or visit us on our company website FinancialSenseWealth.com.

Jim Puplava:
In the meantime, on behalf of Cris Sheridan and myself, we want to thank you for joining us here on the Financial Sense NewsHour. Until you and I talk again, we hope you have a pleasant weekend.

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Advisory services offered through Financial Sense® Advisors, Inc., a registered investment adviser. Securities offered through Financial Sense® Securities, Inc., Member FINRA/SIPC. DBA Financial Sense® Wealth Management. Content is for informational purposes only and does not constitute financial, investment, legal, or other advice.

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