POLITICS

Wall Street Is Embracing the Trump Trade: What That Means for Investors

It appears there’s nothing that can stop Donald Trump… not the Democrats, 34 felonies, or even an assassination attempt. And this resilience makes his fourth bid for the White House look more certain by the day.

Just one month ago, PredictIt bettors estimated Trump’s chance of winning the presidential election at 52%. By Monday, those odds had climbed to a record high of 69%. His rising popularity is now influencing broader market movements beyond meme investors — who helped pump his Trump Media ($DJT) stock by over 30% after his attempted assassination.

Trumping the opponents: Global investors now anticipate that a potential Trump presidency could bring a windfall of positive events. They’re positioning themselves for the “Trump Trade,” expecting his return to translate into deregulation, higher tariffs, and lower taxes, potentially boosting investment.

• According to Bloomberg, investors believe sectors like banking, healthcare, and oil could see gains under Trump due to expected deregulation and pro-business policies.

• On the contrary, industries reliant on government subsidies and support, such as green energy, are expected to take a hit — given Trump’s previous vocal opposition to the sector.

All Aboard the Trump Train

Not everybody is happy that America’s 45th president could also be its 47th. Goldman Sachs economists have noted that his presidency could have “profound implications” on the euro area — while Chinese analysts have suggested that his return could “spell trouble” for their economy. And those global changes could also impact Americans.

• Trump’s trade advisors have reportedly considered tariffs and trade policies that could weaken the dollar’s value, potentially increasing US exports and impacting the cost of everyday goods.

• For instance, Trump has discussed a minimum 60% tariff on Chinese imports, which the Committee for a Responsible Federal Budget estimates could generate $300B in revenue over a decade or result in a $50B loss.

And then there’s everything else… If Trump is elected, his administration and Republican allies aim to reduce the size of the federal government. Their unofficial Project 2025 proposes “an overhaul of the federal government and sweeping policy changes that would affect families’ taxes, savings and more” (CNBC). With less spending, Republicans have recommended expanding their Trump-era tax cuts, which could add $4.4T to the deficit over 11 years and primarily benefit wealthier individuals.

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LARGECAP RECAP

👝 Burberry Finds Out What’s Inside the Luxury Pandora’s Box

Cousin Greg’s date and her “ludicrously capacious bag” might have unwittingly triggered Burberry’s downfall. While major luxury brands like LVMH ($LVMUY) and Kering ($PPRUY) have dropped ~21% and ~36%, respectively, over the past year, Burberry ($BURBY) stands out like “a lunch pail” and has fallen 64% in the same time.

After yet another rocky quarterly performance, the British luxury brand slashed its dividend and fired CEO Jonathan Akeroyd — bringing in Joshua Shulman, the former CEO of Michael Kors, Coach, and Jimmy Choo, as the new leader.

• In 2022, Burberry brought on Daniel Lee, who had previously revamped Bottega Veneta, as its chief creative officer, in an attempt to take Burberry in a new direction by making it “cooler, haughtier, edgier.”

• But this shift coincided with a luxury market slowdown that led to Burberry’s retail sales declining 22% in the latest quarter — and on the wholesale side, the company expects revenue to decrease by 30% for 2025.

High fashion, low demand: The luxury spending slowdown has affected the entire industry’s sales, but Burberry’s challenges are compounded by its heavy reliance on Chinese consumers, who have cut back on luxury spending amid economic troubles. The downturn has been so severe that CFO Kate Ferry has hinted at potential job cuts as the company seeks to lower costs.

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Markets & Economy

Ethereum ETFs to launch: Bloomberg’s Eric Balchunas reports that the Securities and Exchange Commission (SEC) is requesting final changes to regulatory documents from fund issuers before the launch of Ethereum ETFs this week or early next week. [Read]

Alphabet ($GOOGL) announces its largest acquisition: Google’s parent company, Alphabet, is in talks to buy cloud cybersecurity startup Wiz for a potential $23B. This move aims to strengthen its position against Microsoft ($MSFT) and Amazon ($AMZN) as more companies shift to cloud services. [Read]

Macy’s ($M) rejects $6.9B buyout offer: Macy’s board has ended discussions with Arkhouse and Brigade over a buyout offer, citing financial issues and insufficient value. Macy’s is also closing 150 stores this year as part of its turnaround strategy. [Read]

Business & Wealth

OpenAI claims progress on AI reasoning: Researchers believe they are nearing development of artificial intelligence capable of human-level “reasoning,” aiming to advance to the second stage of their five-level artificial general intelligence (AGI) scale. [Read]

Amazon Prime Day set for record sales: Adobe Analytics forecasts Amazon’s Prime Day will generate $14B in US online spending from July 16-17, up 10.5% from last year, despite competition from other retailers’ earlier sales events. [Read]

US homebuilding permits stall: US metro areas are expected to issue fewer housing permits this year, despite a 3M housing unit shortage. This move supports higher housing prices amid ongoing interest rate and labor challenges. [Read]

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DIGIT OF THE DAY

Apple Hits $8B Sales Milestone in India As The Company Reduces Dependence on China

After hitting a great wall with its growth plans in China, Apple ($AAPL) found a new path through India’s gateway. The company’s revenue in India reached a record ~$8B for the year ending March 2024, marking a 33% increase in annual sales from the previous year. Facing trade tensions with China, Apple is working to reduce its reliance on the Chinese market and is focusing on alternative markets like India to diversify its manufacturing and revenue sources.

• iPhones drove more than half of India’s record sales — and now hold about a 3.5% share of the 690M active smartphones in the country.

• India accounts for ~2% of Apple’s total $383B in fiscal-year sales, and CEO Tim Cook sees India as “an incredibly exciting market” and a “major focus.”

The apple of analysts’ eyes: After a rocky start to 2024, Apple has been getting love from analysts — with shares rising ~27% this year. The tech giant emerged as a top pick at Morgan Stanley following the announcement of its new AI platform, Apple Intelligence. With India’s growth potential and Apple’s strategic expansion into AI, analysts see this as a bullish opportunity. Loop Capital has upgraded Apple to “buy” and set a new price target of $300, up from $170.