Author: HubensCapital

The last few weeks have been toxic for the market as Donald Trump has started with zero-IQ trade policies. The whole world is abusing the US he mentions. Obviously that is not true, but just that opinion on itself is not immediately harming the economy. His actions are, and especially his Dollar cost averaging on trade tariffs. Tariff more and more and trying to scare the rest of the world which does not work out.
The S&P is down 12% YTD and the Dollar has weakened heavily too. Over 10% versus the Euro. In Euro terms, the S&P is down around 25% YTD.

Dollar Cost Averaging

Not per se a bad strategy if you buy good value. Remember that value and price are not the same thing. As Buffett said: “price is what you pay, value is what you get”. It is fine to buy lower and lower as long as you buy quality. Dollar cost averaging down on a high quality stock on the long term will most likely benefit you. Or on the S&P or MSCI.
Or: if your Nike shoes are on discount, you might buy an extra pair because you know they are of good quality. Trump is buying more and more waste at lower prices. It is still waste.
Trump chose the ‘wrong’ underlying to dollar cost averaging down: his tariffs that block world trading with the US. The more you average down, the more difficult it mentally becomes to ‘hack’ out of it.
It’s like owning and buying and buying a stock that keeps diluting new shares on you. It will not work out and you better hack out early than when you burned most of your cash. Still then you need to hack.

Trump trying to do more

Trump is now investigating whether he will be able to fire Jerome Powell, the chairman of the Federal Reserve (FED). Powell is responsible for setting the short term interest rates and has mandates to control the inflation and to maximize employment and keeping the economy healthy. Powell has a high IQ job and independently from politics should be able to do what’s best for the US economy.
Trump wants Powell to cut rates, but Powell does not want to. Because the risk of a rebound in inflation due to Trumps tariffs. High inflation and a slowing economy are a difficult mix for a central bank. Cutting rates would boost the economy but raise prices even more. Hiking rates would harm the economy more while tough times might already coming up soon. Powell is stuck and cannot do much at the moment.

CHAOS if POWELL WOULD BE FIRED

Markets would crash further if Powell would actually be fired by Trump. He would then politically intervene in something that is academic. He would find a new FED boss that will cut rates aggressively and weaken the Dollar and the US economy further. It would be chaos.

What’s next?

Markets are the last hope for a change in course regarding Trumps policies. Trump listens to nobody, and the last hope can be that he listens to the stock market. He has always mentioned that the stock market is the indicator of how well a president is doing. And that if the Dow Jones tanks 1000 points on a day, the president should be shot to the moon. No excuses!
Musk could do that!
Never waste a good crisis! Try the newsletter! We have had and will have perfect cherry picking opportunities!

Over the last few days/weeks we have seen multiple actions done by Trump. Currently, it seems Trump is doing too many random things that the market starts to take him less seriously and the impact of his decision making is getting smaller.

tariffs on Mexico, Canada & China

We saw a significant downtick on Monday in the S&P of 2% in the early morning, after Trump announced 25% tariffs on Canada & Mexico. These kind of tariffs would put Canada and Mexico in recessions if they would be introduced and active for a while. Trump put these tariffs on Canada & Mexico as in his opinion these countries are doing something that is unfair. Whether it is unfair trading practices, not checking the borders well enough or anything else. Trump will find a reason to put tariffs on your country to be able to get what he wants. With a normal dialogue he is unable to achieve his goals.

Inflation issue

Trump has a lot of power as being the president of the most powerful country, especially from a economic perspective. So, counterparties need to take him seriously. Though, putting tariffs on many important trade partners is not going to help anyone in the long run. Trump has been always accusing Biden of creating too much inflation. With putting tariffs on trade partners, Trump will make goods more expensive for the consumers. He will most likely add to the inflation while trade tariffs have no positive effects for the production levels and the economy.
After talking to Canada and Mexico, Trump did suspend the tariffs for 1 month. So he is crawling back a bit already on day 1. Canada and Mexico are finally listening to him so that is why he said he did suspend the tariffs. So far, Trump is barking but not biting. The same can happen with the China tariffs. China tariffs he raised with only 10% extra (upon what Trump and Biden did in the past) and he aims to visit China soon. Where he probably will make a ‘great’ deal according to him.

Barks too much

Trump wants Greenland, requires European countries to pay 5% of GDP each year to NATO, wants to clean Gaza and take it over, etc. He is wanting too much and everyday he has something new. The rest of the world slowly starts to take him less seriously and this will not work in his favor. For many of his policies he needs some support from his allies. As his allies are important trade partners and let not forget also strong investors in the US. When he gets taken less seriously, his actions will most likely start to have a dampening effect on the market impact. The market is getting less scared.

Market getting less scared

Over the last days we have seen volatility coming down as the market gets more used to Trumps ‘Bark but not Bite’ policies. The more he barks, the less impact he will be having. Less is more, but he is old enough to not learn anymore and keep barking.
Our newsletter stocks are having a great 2025 so far and we are very focused on finding great opportunities for the long and short run. We made a 30% scalp on NBIS in just 3 days after some in depth research on the DeepSeek crash!

Fictief belasten gaat niet meer

Het lijkt die kant op te gaan met box 3 en dat is een goede zaak. Momenteel is er een box 3-systeem met veronderstelde rendementen die dan belast worden tegen 36%. Fictief belasten is in de praktijk natuurlijk niet fair voor veel mensen, want een aanzienlijke groep haalt het fictief rendement niet. De overheid verloor al tal van rechtszaken en ontving ook al negatieve adviezen van de Raad van State met betrekking tot het fictief belasten. Eigenlijk moet er gestopt worden met forfaitare rendementen. Maar de politiek wil er toch mee doorgaan tot er een nieuw stelsel op basis van werkelijke rendementen komt. Dat stelsel is al jaren uitgesteld en zou nu vanaf 1 januari 2028 worden ingevoerd. Iedereen weet nu al, dat dat pas 2030+ wordt. Het afwikkelen van een kwestie als de kindertoeslagaffaire gaat al 10-20 jaar duren! Daarnaast zijn de ICT capiciteiten van de belastingdienst ook niet om over naar huis te schrijven.

herinvoering vermogensbelasting

De variant die het zal gaan worden is: terug naar de oude vermogensbelasting van vóór 2021. Waarbij niet sprake is van een werkelijke of forfaitaire rendementsheffing maar gewoon van een vermogensbelasting (een % belasting van je vermogen, bijvoorbeeld 1.0%). Zolang je het maar geen rendementsheffing noemt. De politiek is niet eens een staat om een definitie te maken voor (werkelijk) rendement. Zo mogen vastgoedeigenaren wel de inkomsten doorgeven maar veel kosten niet.
Ook neemt de politiek de inflatie niet mee in de berekeningen. Nu met de hogere inflatie, zal dit ook weer leiden tot nieuwe rechtszaken. Hoezo 3% rendement als de inflatie 4% is?
De vermogensbelasting zal weer worden ingevoerd indien realisme boven komt drijven. Wellicht zal men eerst zeggen dat het tijdelijk is tot het nieuwe systeem op basis van werkelijk rendement wordt ingevoerd. Dat systeem zal er waarschijnlijk niet komen en de vermogensbelasting zal permanent in stand blijven.

Vermogensbelasting fair en in algemeen belang

Een vermogensbelasting zal voor veel mensen fair zijn en met een fatsoenlijke vrijstelling (bijv 100k) wordt ook de kleine spaarder of belegger niet  belast. Ook is het zo dat je beleggingen niet zwaarder belast dan spaargeld, wat met forfaitaire heffingen wel steeds zo is. Nederland moet investeren om internationaal economisch sterk te blijven. Het stallen van teveel geld op bankrekeningen helpt hier niet bij. Ook moet het defensiebudget wellicht naar 3%+ van het BBP. Hier heb je ook investeerders voor nodig. Wellicht zelfs nog een idee om defensiebeleggingen fiscaal vriendelijk te maken. Maar nu dwaal ik af.
Ook een heel belangrijk aspect is dat een vermogensbelasting simpel is in te voeren. De belastingdienst kent je vermogen en kan het simpel uitrekenen. Geen detaildocumentaties zijn vereist van de hardwerkende burger. Daarnaast bespaart de overheid ook veel geld aan ambtenaren die veel meer nodig zijn bij werkelijk rendement belasten. Deze FTEs kunnen dan op belangrijkere zaken worden ingezet zoals het afronden van de toeslagenaffaire. Ook: slechts ruim 1% van de totale belastinginkomsten komt uit box 3. Terwijl veel attentie en moeite constant aan die box wordt besteedt.

in lijn met Slogan belastingdienst

Werkelijk rendement belasten is wellicht fair, maar voor onze belastingdienst en overheid een drama dossier en dat zal het blijven. De politiek probeert de definitie van werkelijk rendement constant aan te passen en dit levert verliesmakende rechtszaken op en een drama documentatieplicht voor burgers.
Een vermogensbelasting is fair. En simpeler, en begrijpelijker. En past beter bij de slogan van de belastingdienst: “Leuker kunnen we het niet maken, wel makkelijker”

Over the last few weeks we have seen the market continue the trend of the last years: up. There has been some volatility already but so far the indices have been moving higher. We do especially see an updrift in Europe. Europe has been relatively strong as Trump has softened a bit on the tariff statements. Initially, it looked like he might just tariff everything from Europe and China. Though, lately he has been saying there will first be some research into trade practices that are unfair according to the US. And after that decide which products to sanction. It will not be a surprise that most likely European cars will be tariffed. This will hit Germany the most. Germany, the motor of Europe, has been facing economic headwinds already for a few years and there is not a lot of hope for the next months/years. They have to invent themselves again and the economy cannot keep ‘driving’ on the automotive business.

And now?

We do expect that markets will relatively stay calm. There will for sure be some volatility on sudden moves and statements from Trump. Though, directionally we think the market will stay stable till one can really see the effects of the policies that Trump implements in the first few months. Geopolitics are important, but most people will watch what the effect of Trumps measures is on the inflation in the US and worldwide.

Inflation

Trump wants to fight inflation. Energy inflation is relatively easy to fight for him as he just will try to maximize the production of crude oil in the US. “Drill, baby, drill”. He will try to quickly produce more oil, so he can start claiming some victories on inflation soon.
Though, the medium and longer term effects of his policies might actually not help for the inflation level at all.

Effect of tariffs

The effect of introducing a lot of new tariffs makes especially goods just more expensive for everyone. In general there are no winners on the long term. Trade of goods becomes more expensive and this will have a unwished effect on inflation. Trump initially can say he does this to be able to make as many as products as possible in the US and to create more hobs. But the US does not have the ideal wages and cost of goods sold to do that obviously. For many goods, it is important to let them be produced by countries with lower wages. Inflation will be boosted if not.

Trump trying to push the fed

The effect of Trump trying to push FED members to lower rates quickly will not help either. Officially the FED is independent of politics. Though, with Trump nothing is independent of politics. He has enough power to make sure of that. Lowering rates and with that making money cheaper is not the way to fight inflation. You lower rates when inflation has really cooled off towards the target level, or when the economy needs stimulus. Both are not the case at the moment. Lowering rates too quickly now can bring a serious bounce in inflation.

Earnings

The earnings season has started in the US and we closely watch whether the earnings will bring a directional move in the stock markets. Most often this is not the case, unless many of the Magnificent 7 stocks will show very weak or very strong guidance.

To Conclude

We expect markets to have more volatility than in 2024. Though we do not think there will be a large directional move till more effects of Trumps policies are being seen in the markets. The most important figure to watch is the inflation and potentially surprise tariff actions can bring volatility back in the market too.

Last Wednesday, Powell decided to cut the rates with 25 basis points. This was widely expected. Though, the markets did pull down heavily during the event. The reason? A very hawkish tone where Powell discussed that even the current rate cut was not just a formality. And looking forward, inflation expectations were heavily raised for 2025. And fewer rate cuts than before are now being expected. Money stays more expensive for longer, so the stock market sold off as many were hoping for lower rates more quickly in 2025.

2024 bull market will be challenged

The above market reaction has to be seen in relation to the heavy rally we have had in 2024. Looking at the market dynamics of the last week and the volatility that seems to be somewhat back, we do expect an interesting January. A fresh start where the bull market will experience a healthy challenge. We don’t bet on downticks, but we see more uncertainty in the bullish trend then we have seen the last 6-12 months. There are some issues to be tackled for the world now Trump is getting into the White House. We do expect some quick actions from Trump in Q1 2025 that will cause elevated volatility compared to when Biden was in power. Elevated volatility will bring more opportunity for stock picking and option trading!
In the end the US markets might be better off with Trump, but the path to more strength will be jumpy.

Inflation more stubborn than market anticipated

We should also not forget that it is likely that Trump’s America first policy will lead to price increases on the medium and the long term. At least, if he is real with high tariffs. In the end, tariffs have no winners. As we see that inflation is already hard to tackle now, we do expect that this will only get more difficult. Geopolitical tensions are another point of concern in trying to bring inflation down.

Correction would be healthy

Next to topics like geopolitical tensions and tariff uncertainty, the bull market might just need a healthy correction of 5-10%. Again, do not bet on that as that often goes wrong! Just be aware of it that some good opportunities might arise! More money gets lost on trying to time the crash versus in the crash itself. So do not try to time the markets, try to understand the scenarios and buy on the discount instead of selling on the ‘high’.

Be prepared!

Most likely a choppy few weeks/months ahead where we will possibly see some tax loss selling pressures unwinding. Oversold stocks in December might be oversold partly due to the tax loss selling in the US. Where investors sell some of their losses of the year to avoid having to pay a hefty tax bill. Usually, these stocks have ample room to rebound at the start of the year. January is often an interesting month to pick some great small or mid cap stocks for the first half of the year. We will focus on that in January!

We discussed our projections before the US elections and mentioned that a Trump win would bring divergence between European and US stocks. On the morning after the election result, the S&P rallied 2% and the European stocks on the correlation and on the algorithms also rallied 1.5%.
Algo’s are not smart yet and the above shows that there is still a long way to go for algo’s, AI, smart data, et cetera. It was just a flow game on the morning after the elections, but valuations where out of line. To our newsletter members, we mentioned to reduce exposure in European stocks as the rally did not make sense.

Days after, smart slow money arrives

Now, since just before the US elections, the S&P us up around 5% and the European EuroStoxx is down around 2.5%. Oh yeah, do not forget that the Euro also lost around 4% in value against the Dollar.
When the quick, greedy and not so smart automated trading activity lost some ground, the smart money arrives. Investors who are actually did some due diligence and sold into the uptick in Europe. How can Trump be positive for Europe on the short and medium term? Not. Europe loses its babysitter and will be more on its own. Europe needs to reinvent itself and that takes time.

Reinventing means for example:

• Deregulating and focusing more on the economic world’s importance instead of trying to make everyone happy within the EU
• Focusing on a more decisive structure. Currently, important changes always get vetoed within the EU, often by Orbán.
• Rethinking geopolitics. How can we become an important player again in worldwide geopolitics?
• Focusing less on putting out fires and more on the bigger picture.
• It takes time, many years, or even generations. But Europe needs to start NOW.

Trading and investing are different things

Trading is a full time job, while investing has more to do with doing the homework and taking a position. The latter is the best for most people and investors. Maybe traders are able to make some cash on the European uptick on the morning after the elections, but for most people the real money is in doing the homework and rethinking overall asset allocations. Do you want to be heavily invested in Europe on a Trump Victory? Not for a while probably. Generally it is better to wait for inflection points – evidence that the situation is turning around, before you step in.

While the elections are in the US, they might matter more for Europe than they do for the US. Trump could bring heavy volatility in the European stock markets like the EuroStoxx, due to several reasons.

Europe depending on the US in the war

The first reason has to do with the vulnerability of Europe towards Russia. Europe alone will have difficulties helping Ukraine enough to be able to withstand Russia or at least help Ukraine to get into a good position at the negotiation table that will be there sooner or later. The US is essential in the overall aid packages for Ukraine and also in scaring off tactics versus Putin. A Trump win will bring uncertainty around the support for Ukraine and also the membership of the US with regards to NATO. As Europe is geopolitically a weak player, they need the US on their side. Europe has always leaned too much on the US and never really thought about their geopolitical status and being an innovative economy.

New tariffs coming

The second reason is that Trump will most likely induce new tariffs on Europe. Trump wants to create as many as US jobs as possible and he will use new tariffs on European cars as a way to boost the US car businesses. Trump might do a good job for the US economy, but Europe will be having difficulties.

Europe needs to invent itself again

In general, Europe’s economy is mostly ‘driving’ on old industries. And then once they have a brilliant company like ASML, the US comes with sanctions on the export to China. Cause otherwise? They might leave NATO? Or Rutte would have not become the NATO secretary? Europe is in every geopolitical game that is being played, 0 – 3 behind and even Germany is not able anymore to score in the final minutes of the game.

HARRIS win will be dopamine shot for Europe

On the other side, if Harris wins, Europe will initially be very happy. But so happy that they still will not fix the current situation. So that in 4 years they might be even doing worse on the geopolitical field. Europe has to reinvent itself to become a strong geopolitical player and otherwise it will end like an open air museum.

Investors finally believe in Chinese stocks

For many months and years, the economy of China had been relatively weak. The expected post Covid economy boost never really came and Chinese stocks had been a bad investment. The economy has not been the only reason, but also the possibility for an escalating China Taiwan scenario. Now, investors finally believe in it and throw out the worries.

What boosted the hard run up in equities?

The boost in equities was made possible by the People’s Bank of China. They moved to lower the amount of cash that banks must hold on hand. They also cut the benchmark interest rate on reverse repurchase agreements. They also cut mortgage rates for existing home loans, added new structural monetary policy tools to support the stock market etc. So far, every time the central bank tried to stimulate the economy it somewhat backfired as no one believed it would help enough. Now they came with a bazooka and investors are liking it (for now).

What did we do?

We had built a solid exposure to China over the last 12 months, with significant holdings in Alibaba and KraneShares CSI China Internet ETF (KWEB). The main reason for the exposure was the exaggerated underperformance of Chinese equities against the rest of the world. This could endure, but some exposure seemed to make sense for a reversal. Though, after the 35% and 45% rallies respectively recently, we have taken some profits and keep smaller long positions for now. The Hang Seng Index rallied over 30% and definitely caught a bit up with where it probably should be.

Economic issues not solved

The economic situation remains vulnerable. The economy keeps facing headwinds. Industrial production numbers over the last months have shown strong contractions versus a year earlier. Retail sales and also the Chinese (commercial) property business remain very weak.
The issue remains that China is trying to focus more on throwing money stimulus packages into the economy, in stead of tackling the economic problems by changing and reversing policies. A wiser macro-economic set of policies and economic reforms would be rationally the way forward. It is great that Chinese shares get a boost now as forces start to believe that lowering rates and stimulus measures will finally help. But the risk of the epic boom and bust as we saw in 2015 remains real.

What’s NExt?

A realistic scenario is that the bull run continues for a few weeks but that then profit taking will take place more and more towards the US elections. In a Trump victory, Chinese equities can easily drop heavily back down. Or in case that the recent stimulus packages are missing the expected economic results.
In our newsletter we will keep a strong focus on China.

S&P closing in on ATH

No one talks anymore about the Yen Carry Unwinding Trade that brought markets heavily down at the start of this month. No one talked about it before it happened, and no on now after it has happened. It was a quick event with a strong downtick and a solid recovery. Currently the S&P again close to the all-time high (ATH).
Besides the Nikkei Panic Day, there has been little going on. Earnings season has not brought that many surprises and the economy of the US is clearly slowing down in combination with a lower and stable inflation.

jackson hole

In the yearly Jackson Hole event (somewhere in the Mountains in Wyoming), Powell on Friday laid the groundwork for the FEDs monetary policy for the next months. The Jackson Hole event is traditionally an event where the chairman of the FED does try to manage the expectations of the financial markets regarding what is likely to happen on the central bank front (read: interest rates mostly).
The market was and is pricing in 100bps of rate cuts in the next three meetings combined, so for the rest of 2024. Powell’s speech on Friday was in line with what the market expected and he doesn’t rule out the 100bps of rate cuts. Though, 75bps in cuts is also very realistic and in my opinion more likely. Though, the fact that Powell did not try to push back against the priced rate cuts did cause a new round of strength in the stock markets with the S&P rallying over 1%.
The middle one below shows the most likely scenario according to the market, where the target interest rate will go to 425-450 by the end of the year versus a target rate of 525-550 at the moment of writing.

all not so interesting

Regarding the central banks and the high likelihood that solid rate cuts are approaching: why care?
Exactly. The picture is quite clear with a slowing economy and a stable slowing inflation. Too many people are expecting the room to maneuver for central banks too high at the moment. People find it difficult to move on from a time where inflation was not under control to a more stable environment. It should not be that exciting over the next FED meetings as it is quite clear what will happen: rate cuts and more unsurprising inflation figures in combination with an economy that cools down probably a bit more.
Next to the above, the reality is that the markets are most likely back in summer mode. The market missed a few weeks of that mode when stocks declined at the start of August. The VIX, back to silent levels, also shows that there is not a whole lot too expect in the next few weeks and months. The next decent planned event is the US elections in November. Next to that, we need to wait for a new event/theme to move the markets. You should not bet on that, hut just wait till there a signs of such a theme and then make up your mind and spot opportunities. We will keep you posted!

next week, nvidia!

Most interesting day of the week will be Wednesday. After the stock market close, Nvidia will report their earnings over Q2. Nvidia is the second biggest company in the S&P and does quite often have large moves on the earnings as it is the AI darling of Wall Street. And AI does move the markets this year. Looking at the Nvidia options, we can see that the market expects an around 9% move on the earnings after the bell on Wednesday. Nvidia has an around 6.5% weight in the S&P. So the S&P can also see a decent move of close to 0.6% after the close.

recently discussed a large small cap opportunity

Recent weeks have been slower in the markets, but we have spotted a small cap company without debt and with large profitability that due to low market volume and recent stock dilution has been punished far too much in our opinion. As the dilution is over and the company now even announced a buyback (of over 50% of the shares at the current price in the next 2 years), we do see a very high risk/reward opportunity where the chance of x3-x5 is probably even larger than the halving or worse in value.

YCUP

It was an interesting week with large moves in indices: high volatility and fear on Monday as the Nikkei ticked down overnight over 10%. Algo’s, momentum traders, scripts, line drawers, etc followed the numbers and sold everything down. Buying the dippers or ‘smart’ money waited a bit and possibly took advantage of the so called Yen Carry Unwinding Panic (YCUP) and brought the US stock index back to unch for the week. What is YCUP? Just read those other 4592 posts online about it. Anyway, in 5 years no one will remember the YCUP downticks of 2024.

momentum: I sell because you sell

YCUP is/was a classic example of a sudden change of course of a large flow of money that causes market momentum to change and all stocks worldwide to collapse. It does not matter anymore what the fundamentals are of a company are at that time, it just gets brainlessly sold. These days, lots of people only look for day trades (this generally backfires on average) and focus at correlations and betas and not at medium/long term valuations. If stock A and B plunge, we need to sell C. This relatively value trading makes sense if done well, cause there is money in correlations and spread trading. But this is generally not the money a person sitting at home can capitalize easily on. Its a professional game, all about speed, information, accuracy, models and capital.

Relative value (good leg & not so good Leg)

If you do not know which leg is best, cause you do not understand the fundamentals and reasonable pricing, you buy 1 leg and sell 1 leg. One of them is probably not so great, but the spread makes and relative value can work out for professionals (solid trading firms) who know what they are doing.

Play a game where you can win

In these kind of situations, where people lose track of fundamentals, the best opportunities generally arise in picking up (high) quality stocks that are punished with the rest. That’s what we focus on in the newsletter. We recently took a large position in a stock that has been dumped heavily on low volume and now is a potential 2-3 bagger after very strong earnings and a outlook raise! Want to find out?

Upcoming week

High volatility might remain for a few days/weeks and we might get another YCUP round. As you can see below the VIX is still at elevated levels versus a few weeks back.

The S&P has been trading in a wide range over the last few weeks and higher realized can be expected than when the S&P was making all time highs bidaily. Still, as I have mentioned before, so far the index downticks have just been a mild correction.
An important figure to watch next week is the US CPI inflation figure over July, published on Wednesday.. There is a significant change (around 50%) for a 50 bps rate cut in September. A solid deviation from the CPI expectation can move this chance quite a bit around. There is a 2.9% CPI and a 3.2% Core CPI year on year expected. This CPI print will be closely watched and can easily move the S&P 1-3% on that day.