The market at a glance: What I'd say

So, Donald Trump was re-elected. While it’s too soon to fully gauge the impact of his new presidency, financial markets seem to have already drawn their conclusions. Are they jumping the gun? This month, we take a closer look to uncover why the real opportunities might still lie ahead.

In our "Demystification room," we've analysed over 20,000 U.S. stocks from 1950 to 2022, comparing them against the S&P 500 to finally settle the debate: does stock picking outperform index investing? Discover our findings inside!

Happy reading!

The market at a glance: What I’d say

Song of the month: “What’d I say” by Ray Charles

Legend has it that the iconic song What’d I Say was born out of pure spontaneity. During a 1958 concert in Brownsville, Ray Charles, running low on material, turned to his band and backup singers and said, "I'm going to improvise—follow me." The result? A timeless call-and-response masterpiece that revolutionised R&B and cemented its place in music history.

Now, another master of the responsorial style—though in a vastly different domain—has recently been re-elected President of the United States, ushering in promises of sweeping change.

As nations scramble to align their strategies and financial markets sway to the rhythm, it seems only fitting to begin this discussion with What’d I Say.

Since November 5th, the spotlight has been fixed on Donald Trump. The markets, too, appear to have taken their cue, responding decisively to every announcement of a key administration appointment. In their often overzealous reactions may lie the seeds of future opportunities.

Let’s delve deeper into how the markets are answering the president’s calls.

Key takeaways

• Like Ray Charles, Donald Trump is a master of the responsorial style. As he calls, the markets respond—and with these swings, opportunities emerge.

• While US equities were in harmony, international markets fell out of sync, with European and Asian indices struggling under the weight of tariff fears and strained global relations.

• The bond market remains skeptical, questioning whether Trump’s policies will stoke inflation—an off-key note for a nation with $35 trillion in debt..

• Digital assets find their groove: Bitcoin hit a high note, nearing $100,000, as crypto-friendly figures in the administration promise a supportive environment.

• Commodities wavered between sluggish demand and policy uncertainty, while the dollar, after a pre-election rally, paused to catch its breath.

What happened with equities

Some markets have quickly aligned with the president’s rhythm. Since early November, the S&P 500, the flagship U.S. stock index, has surged on a wave of optimism. It’s a familiar tune: markets greeted Trump’s initial election in 2016 with similar enthusiasm.

This time, however, there are notable differences. While deregulation and tax cuts remain central to the administration’s agenda, new priorities have emerged, driving gains in sectors like energy and banking.

Beyond U.S. borders, the mood is less harmonious. International markets appear out of sync, with investors seemingly turning their backs on most European and Asian indices, which closed the month in the red. The looming threat of new tariffs and heightened tensions in international relations cast a shadow, dampening sentiment and leaving global markets struggling to find their footing.

What happened with bonds

Despite a strong start for President Trump—bolstered by a "dream team" of entrepreneurs and a Senate majority—the bond market remains skeptical. Analysts are wrestling with a critical question: will the new administration's measures ignite higher inflation, or help contain it?

Winning the confidence of the bond market is essential for any government, particularly with $35 trillion in public debt and soaring borrowing costs. Recent history offers a stark reminder of the consequences of misalignment: In 2022, Liz Truss’s economic proposals were soundly rejected by British markets, leading to her rapid downfall. Similarly, France recently saw its borrowing rates surpass those of Greece—a signal of shaken investor confidence.

When the bond market loses faith in a policy agenda, it speaks loudly and clearly—and the resulting discord can come at a steep price.

What happened with commodities, currencies, and digital assets

One market making its voice heard is digital assets. The appointment of crypto-friendly figures like Elon Musk, Scott Bessent, and Paul Atkins to key positions within the administration signals a potentially more supportive environment for cryptocurrencies. Bitcoin, in particular, has seized the moment, flirting with the symbolic $100,000 milestone.

In contrast, the commodities markets remain in flux. Demand is sluggish, while supply struggles to adapt to the anticipated impact of new tariffs and shifts in U.S. energy policy, leaving the sector uncertain about its direction.

As for the U.S. dollar, which surged strongly in the lead-up to the election, it now appears to be pausing to catch its breath, reflecting a moment of consolidation amidst broader market recalibrations.

So far, the financial markets’ reaction to the new president’s announcements has been swift and, in many ways, binary. Yet the full composition is far from written.

First, the only predictable feature of Trump’s presidency is its unpredictability—a factor markets have yet to fully integrate into their outlooks.

Second, even the most promising administrations on paper must prove themselves in practice, and there is often a substantial gap between intention and implementation.

Finally, the reactions from global trading partners have been largely underestimated. Will Europe, Asia, and Canada remain passive? History suggests otherwise. Having already felt the sting of tariffs, these nations are unlikely to sit idly by. The dynamics of international trade are far more intricate than they appear at first glance.

Ultimately, the responses of the “choristers”—global markets and trading partners—are just as important as the calls of the lead “singer.” It is in the adjustments, tensions, and moments of discord that the most promising investment opportunities may emerge.

Let’s keep our ears sharp and prepare to step into the rhythm of the unfolding dance!

Demystification room: What are your chances of beating the markets?

When it comes to investing, there are two main approaches:

1. Stock picking: Trying to identify the "winning" stocks from thousands of options.

2. Index investing: Buying a little bit of everything and trusting that the stock market, on average, will grow over time.

While index investing has gained popularity in recent decades, many investors still lean toward stock picking—for one simple reason: it’s exciting. After all, who hasn’t dreamt of discovering the next Apple or NVIDIA?

But does it work? Is the potential reward worth the effort? What are your chances of beating the market?

To answer these questions, we analysed the performance of over 20,000 U.S. stocks listed between 1950 and 2022. We compared the lifetime returns of each stock—from listing to delisting—against the S&P 500, which represents the largest 500 companies in the U.S.

The results: only about 1 in 3 stocks outperformed the index.

Even if a 35% chance sounds tempting, there’s another factor to consider: expected returns. The reward needs to justify the risk. But here’s the reality:

• Stocks that underperform the S&P 500 deliver a median annual relative return of -29.3%.

• Stocks that outperform the index deliver only +8.9% annually.

In short, the losses when you’re wrong far outweigh the gains when you’re right.

Some argue that focusing on delisted stocks might skew the results since these tend to underperform. Yet, when we analysed 6,244 currently listed U.S. stocks, the findings remained consistent.

Another striking insight: The average lifetime of a stock is just 10.5 years. Even if you’re confident in your stock-picking skills, the window for success is often short-lived.

The conclusion? Stock picking may offer excitement, but the odds—and the math—suggest that for most investors, the simpler path of index investing may be the better bet.