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Why did Jay Powell cut rates? Trump's policies will be inflationary, stocks are at all-time highs and so forth. Core inflation and overall inflation remains higher than the Fed's targets. After the September 0.5% cut, the market priced in a 2% cut over the next year, but now it expects 3 x 0.25% cuts. For certain, Trump will initiate massive deficit spending, so a lot more debt will need to be financed. If Elon Musk can pull off a new Dept. of Government Efficiency, then maybe deficits in coming years could be better than expected. We'll see. Meanwhile, the massive treasury debt that needs to be financed will keep pressure on the bond market. Eventually, stocks will care about this.
Both hold financials,but ZWB uses covered calls. HMAX has performed a little better and offers a little more yield. ZWB writes only half the securities, so it takes in less yield, but gets more upside capture. The price return is 11% on ZWB in the past year vs. HMAX's 6%, but the total return is close. However, ZWB pays you you more of a yield. nearly 7%, but gives less growth.
Both hold financials,but ZWB uses covered calls. HMAX has performed a little better and offers a little more yield. ZWB writes only half the securities, so it takes in less yield, but gets more upside capture. The price return is 11% on ZWB in the past year vs. HMAX's 6%, but the total return is close. However, ZWB pays you you more of a yield. nearly 7%, but gives less growth.
He likes covered calls because they offer extra income and are tax-efficient. Remember that if the call strategy overwrites the entire portfolio (doing it closer to current prices), you will get more yield, but less upside. In a growth market, then, you don't want any covered calls. So, EMCC will do better than, say, ZWEN.
A favourite ETF of his. A tax-efficient way to extract income in international markets. But the incoming America First agenda will likely be pro-US and negative other places in the world through tariffs. Dividend-paying stocks are generally not big exporters. EMs are likely to targeted far more than Europe, but Trump, he thinks, will slap tariffs across the board.
The Trump trade: Will history repeat? He examined ETFs across various parts of the market, 2016-2020. Of them, US large-caps performed the best, but he doesn't expect an average annual return of 13.78% to happen again, given how expensive stocks are. Also, he looked at the forward PE on election day 2016 vs. now; its 18.5x PE (a little high) vs. 25x today. So, markets are much more expensive today; history says that when markets are expensive, then forward-based returns come down. Small-caps are trading at the identical PE in 2016 vs. today, so small-caps should perform better than mega-caps, because the smalls have more domestic (US) sales. Bond yields: they rose from Nov.2016 to late 2018, worried about Trump policies, but yields declined after late 2018 because the market worried about a slowing economy and the Fed wanted to cut rates. Today, yields are much higher. because now we've been worrying about inflation, not in 2016. Under Trump's first term, it was 75% debt-to-GDP vs. today's 95%, and the cost of the debt is nearly double. Likely, he will extend tax cuts, but doesn't see additional cuts. He expects small/mid-caps to outperform large caps in the next few years. XHHQ and XMHQ were the ETFs he examined here.
The housing recovery isn't a done deal. The key 10-year yield rate will likely be stuck between 4-4.3%. We have budget deficits to worry about stronger growth and fewer rate cuts. Good news is that homeowners have built up a lot of home equity, which could help HD. Also, the XLY discretionary ETF is doing great.
