Editor’s Note: As we’ve discussed recently, a Trump presidency has sweeping implications for the economy as well as the stock market. I also think it will trigger the next AI Boom… and investors would be wise to position themselves now. Because if there’s one thing we know about innovation, it happens at a breakneck pace.
So, today, I want to share a special essay from InvestorPlace CEO Brian Hunt, where he’ll review the implications of a Trump presidency and what it means for investors. Specifically, he’ll share three factors that should drive stocks higher. Check it out below.
Thank goodness.
It’s finally over.
The most divisive presidential election of the century is over…
… and Donald Trump is the winner.
You may think he’s a bad choice. You may think he’s a great choice. Or maybe you’re somewhere in between.
No matter how you feel about him, Trump is headed to the White House. And we need to talk about what that means for your wealth.Â
His win has major implications.
In this essay, I hope to show you these implications and explain why there’s a lot at stake for you and your family. There are a lot of opportunities in the years ahead… and a lot of dangers.
The key takeaway here is:
I believe the Trump victory will lead a big rise in the stock market.Â
This means we need to be long stocks. We need to be very long. We could get one of the best three-year periods for stocks in U.S. history… which could significantly increase the value of your 401(k) if you’re positioned to capitalize on the bull market.
Three factors should drive stocks much higher from the current levels.
More Government StimulusÂ
Trump knows more about what stimulates the economy and stock market than any past president.Â
He’s a real estate developer and entrepreneur. He comes from the business world, not from state government or the military like so many past presidents did. Â
He knows that low interest rates and government spending spur economic growth over 2-to-4-year time periods.
Interest rates determine the cost of borrowing money in the economy. The cost of borrowing money is a major part of almost every big business initiative.Â
So, falling interest rates stimulate the economy by making it easier and cheaper for businesses to borrow money and fund new projects.Â
These projects can come in dozens of forms – including new factories, real estate developments, ports, highways, communication networks, technology businesses, oil and gas projects. The list goes on and on.
All of it leads to job creation and revenue surges for the businesses involved. Again, Trump knows this as well as any politician in history.
More Government Spending
We all know the government can spend wastefully. But the money it spends doesn’t fly up to money heaven. It gets recirculated back into the economy. It gets redirected… much like how engineers can redirect rivers.
Money leaves the taxpayer’s bank account (either directly via taxation or indirectly via monetary debasement) and then gets redistributed across areas the government deems worthy of massive investment.Â
Much of the money gets sent directly to individuals and companies that spend the money in predictable ways. Think Social Security, Medicare, Defense Contractors, Infrastructure, Health care, Energy programs, etc.
These are some of the biggest, richest money flows on the planet. Even relatively small government spending programs are monstrous compared to spending by private business.
The money the government spends does not disappear. It massively stimulates many businesses and industries. Some businesses get buckets of money rained on them.
Trump knows this powerful fact about the economy just like he knows about interest rates. Like lower interest rates, this is a lever he will pull over and over.
Trump’s big ego is world famous. His image and his legacy are important to him. He wants to go down as a president that presided over a booming economy. And he’s going to use the two levers I just described to make it happen.Â
So, get ready for lower interest rates and full throttle government spending.
Leave Your Philosophy at the Door
You may be asking if all this is short-term thinking that will spur inflation. I believe it is short-term thinking. And I believe it will cause the economy to overheat and generate inflation. But most people don’t understand how inflation works, and Trump will bank on economic growth and its side effects (job creation, business creation, rising stock market) getting more press than the inflation.
You or I might philosophically disagree with Trump “juicing” the economy with lower interest rates and increased government spending. But when it comes to making money in stocks, what you or I like or want philosophically doesn’t matter.Â
If you want to make money in stocks, leave your politics and your philosophy at the door. Focus on what makes stocks go up and down… not what makes your emotions go up and down.
The Second Factor: Extraordinary Innovation
The second factor that will likely drive the stock market much higher under Trump is extraordinary innovation.
As I write this, the world is changing at the fastest rates in history… and this blistering rate of change is getting faster every month.
This is because after years of advancing at relatively modest rates, our computers are now advancing at mind-blowing exponential rates.Â
Every year, our computers get much faster and much more powerful while also getting cheaper and smaller.
This trend has massive implications for our entire economy. It means new industries are being created at light speed… while demolishing old businesses at the same pace.Â
One month a powerful 50-year-old company is a dominant player. The next month, it’s on the road to bankruptcy.Â
Exponential progress is giving life to huge new innovations like artificial intelligence, advanced robotics, autonomous cars, personalized medicine, and new forms of space travel.
Thanks to the blistering pace of innovation…
- The market value of electric vehicle leader Tesla (TSLA) has climbed by 1,048% over the past five years.
- The market value of AI semiconductor leader Nvidia (NVDA) has climbed by 2,493% over the past five years.
- The market value of AI data center infrastructure firm Vertiv (VRT) has climbed by 951% over the past five years.
- The market value of Facebook parent Meta (META) has climbed by 480% over the past two years.
- The market value of AI firm Palantir (PLTR) has climbed 376% over the past 12 months.
- Bitcoin (BTC-USD) has climbed 667% over the past five years.
The list of innovation-powered mega winners in the stock market over the past five years goes on and on and on. The tech world is booming and opportunity is everywhere.
This is thanks to exponential progress, which makes it so that every year, our computers get much faster and much more powerful while also getting cheaper and smaller.
The biggest technological trend of our times is AI. And it’s making it so that we’re living through a time of extraordinary technological advancement similar to the 1990s.
Back to the Future
In the 1990s, three revolutionary technologies – computers, the Internet, and cellular phones – achieved widespread adoption and “converged” to reshape the world and create a historic economic boom.Â
These technologies allowed us to make quantum leaps in productivity and efficiency. Â
It was an incredible time for tech entrepreneurs, investors, and employees. Gale-force tailwinds of wealth creation were blowing.
The benchmark technology stock index – the Nasdaq – gained 40% in 1995…
… then 22.7% in 1996…
… then 21.6% in 1997…
… then 39.8% in 1998…
… and then an incredible 85.6% in in 1999.
During these boom years, top technology firms like Microsoft (MSFT), Cisco (CSCO), and Qualcomm (QCOM) doubled and tripled in value in just months.
Annual stock gains of 300%-plus were common in the technology sector.Â
There was blazing revenue growth all over the economy… driven by incredible innovation in communication networks, software, and computers … leveraged by companies creating brand new industries with massive total addressable markets.
That’s what the 90s bull market was all about. And it sounds very much like the time we are living in right now.
Let’s cover that description of the 1990s again…
… Blazing revenue growth all over the economy… driven by incredible innovation in communication networks, software, and computers … leveraged by companies creating brand new industries with massive total addressable markets.
You’re probably thinking what I’m thinking… and you are right.
Sounds just like today.Â
Blazing sales growth generated by the likes of AI hardware and software makers like Nvidia, Super Micro (SMCI), Vertiv, Dell Technologies (DELL), and Broadcom (AVGO).Â
Incredible new innovations. Companies creating completely new industries with massive total addressable markets.
Exponential technological progress and its offspring AI are changing the world at ever increasing rates. Changes that used to take 10 years to play out now play out in 2 years. Economic winners and losers are being created at much faster rates than they were 20 years ago.Â
AI chip maker Nvidia saw its market value climb 800% from early 2023 to mid-2024. Meanwhile, education firm Chegg (CHGG) – which was hurt by AI – saw its market value plummet by 90% during the same time period.
Keep in mind that AI is the fastest-evolving technology in history.Â
The AI of today is more than 10 times better than the AI of a few years ago.Â
And the AI of two years from now will be more than 10 times better than the AI of today.
It’s advancing in quantum leaps and bounds every six months.
Exponential progress and AI are giving life to huge new innovations like advanced robotics, advanced batteries, autonomous drones, autonomous cars, personalized medicine, and new forms of space travel.
But if you think the world is changing fast now, know that you ain’t seen nothing yet.
That’s because AI is about to enter what I call The Proliferation Phase.
The Proliferation Phase
As much attention as AI has received over the past year, it actually hasn’t changed many lives. Most people aren’t directly and knowingly interacting with AI applications on their smartphones.Â
Sure, it’s been at work behind the scenes at some companies like Microsoft and Google (GOOG), but for the vast majority of people, it’s not a daily feature of their lives like email, Zoom calls, Slack, Facebook, X, and e-commerce are.
That’s going to change soon.
As you read this, more and more “not purely technology” businesses are busy applying AI to increase revenue, make smarter capital allocation decisions, and reduce costs.Â
Macy’s (M) is using AI to create shopping assistants. Volvo is using AI monitoring for vehicle maintenance. Starbucks (SBUX) is using AI to speed up its ordering process. Southwest Airlines (LUV) is using AI to help manage its complex flight network.Â
And importantly, Apple (APPL) will soon roll out a powerful new form of an AI assistant.
This is the start of the AI Proliferation Phase… where “non purely tech” companies apply AI to increase their revenues and lower their costs.
The AI Proliferation Phase will echo the Internet Proliferation Phase… the era after the internet came online and companies built incredible businesses on top of the internet infrastructure.
I’m talking about Google, Amazon, Facebook, YouTube, eBay (EBAY), Netflix (NFLX), Salesforce (CRM), and hundreds of other businesses built on top of the internet and wireless communications.
In 2024, Facebook reached a market value of $1.4 trillion… Amazon reached $2 trillion… Google $2.3 trillion.
As these tech firms grew into those massive market values, they made their key shareholders and executives some of America’s richest people.
These firms leveraged ubiquitous internet connectivity to generate astronomical wealth.
Once the critical infrastructure of the internet was in place, many of the world’s greatest success stories were built upon it. That was the Proliferation Phase… where the internet achieved mass adoption.
A similar thing will happen with AI.
Now that hundreds of billions of dollars have been spent on AI infrastructure – data centers, AI model training, AI semiconductors – all kinds of businesses can apply AI to improve their bottom lines… and all kinds of businesses will get us directly and actively interacting with AI.
I expect this historic revolution to drive up the profits and dividends of many companies and industries. And importantly, it will play a big role in our third factor… which is investor sentiment.
The Third Factor: Surging Investor Sentiment
Most investment analysts struggle with analyzing and timing waves of investor emotion and enthusiasm. After all, it’s hard to reduce something as intangible as “emotion” down to lines on an excel spreadsheet and run financial models with it.
However, investor sentiment – how people feel about today and what the future holds – plays a giant role in the direction of stock prices.
If people look at what’s happening with their income, their business, and the economy and feel good about it all, they are likely to buy stocks and push prices higher.
If people look at what’s happening with their income, their business, and the economy and feel terrible about it all, they are likely to avoid stocks and make it so prices go sideways or lower.
I believe over the next 36 months, a Trump victory is a major positive for investor sentiment.
For better or worse, many investors believe Trump is good for business and good for stock market investments. They believe he will ease business regulations, lower interest rates, and keep taxes from going up.Â
We will see a revival in American optimism… a strong national belief in meritocracy… a strong national belief that better times are on the horizon.
If Trump does all this and big AI developments continue making headlines, we could see a powerful self-reinforcing cycle drive stock prices higher and higher.
People could see the market go up and attribute the rise to Trump’s pro-business policies.Â
New reports of amazing innovation will add to the positive environment… which will drive people to buy stocks… which will lead to higher prices… which will drive more enthusiasm for Trump’s policies, the stock market, and technological innovation… which will drive them to buy more stocks… which will drive prices even higher…and so on.
We could see a powerful positive self-reinforcing cycle send the broad market up by at least 50% over the next three years… with some industries registering 100%+ gains over the same time.Â
We could very well see one of the best three-year periods for stocks in U.S. history.
Now, you might be thinking, “This sounds interesting Hunt. But the 90s tech boom ended with the 2000 Nasdaq bust. And periods of low interest rates can drive wild speculation in many assets, which led to the 2008 financial crisis.”
I’m thinking about that as well.
Yes, years of low interest rates and wildly bullish investor sentiment could easily cause the economy and stock market to overheat. It could lead to a market crash. We see major market crashes once every 5 to 10 years anyway.Â
In the pursuit of making big investment gains over the next three years AND keeping those gains by exiting before a crash, you want to keep an eye on the exit door.Â
Signs that the big bull run may be about to roll over will include wildly bullish sentiment, extremely high stock market valuations, and the broad market breaking below its 200-day moving average.
But before any of that happens, we are likely to be in an environment of great opportunity.Â
Like him or dislike him, Trump just won a mandate. Business and investors will like it.Â
We will enter a new age of American optimism. Position yourself accordingly.
Regards,
Brian Hunt
CEO, InvestorPlace
P.S. As Brian Hunt just explained, this post-election surge is just the beginning of an even bigger opportunity. In fact, I think a Trump Presidency will launch a second boom in AI stocks.
I know you’ll want to be prepared for what’s coming, so I’ve flagged six AI stocks primed for massive gains.
