- The darkest hour is also its peak, the change to light is coming.
- JFL
With that thought we, at Evolution hope for the best for President-elect Trump and his administration. He has made a lot of promises like all politicians. The ones that call for a return of manufracturing to the US is our biggest hope.
Trump inherits a good economy, better than average unemployment and a strong dollar. In fact, King $Dollar had its best year in a decade. It rose 7.4% to close last Friday at 107.79 and hanging at its high. If Trump imposes strong tariffs, this would be the time. Manufacturers would receive a strong dollar that protects domestic production and the tariffs would give them a cushion to reestablish to their roots. He would be smart to utilize Biden's Inflation Relief Act to produce home grown chips. We fear that he will dismantle it as he is opposed to green energy like wind farms.
Our industrial leaders need a new outlook. They should seek to control the domestic market with exports being just gravy. The whole globalization thing hid the outsourcing of jobs, our declining standard of living and the loss of the middle class. If Trump allows manufacturers to just move production out of China only to relocate to VietNam or similar, the whole process will be a failure. To establish domestic dominance, Trump needs to look at auto producers. After a home, this is consumers biggest purchase.
Autos, EVs and Trucks
Our largest company, GM had 6.2m in sales for 2024. It was a good year, but the conglomerate is not the giant in the field or in the US. Car dealers sold 16m in the US in 2024 and Toyota is king with 10.8m in sales. The silver medal goes to Volkswagen with 8.8m. However, the company has lots of problems and we see another entering their position. The bronze medal comes as a surprise. It is Kia with 7.1m. Of the big three, Ford finished seventh and Dodge (Stellantis) was not even in the top ten. This is what I mean to control the domestic market. If you cannot get your fellow citizens to buy your product, what does that say about your product?
The surprise could be the merger of Nissan and Honda. If it happens, they will take the silver unless Trump follows through to protect domestic firms.
Stock Market
Almost every analysis sees growth. A few are hedging their call by saying there will be bumps in the road. The year 2024 was very strong as the rally from 2023 continued. However, the inflation invasion made for a tough year for ordinary citizens. Wall Street never considers regular folk, but that will change as consumers rebel against inflation by cutting spending. Valuations will come into play. The present PE ratio is historically too high at 38. This is 54% higher than average. The same market "experts" see GDP growing at 1.8%. Of course, we, at Evolution say this is not only wrong and misleading, but needs to be changed to reflect wrongs like damage to the environment and climate. We say look at...
January Barometer
The thinking is if the first few trading days are up as well as the month, this is a strong indicator of a good year. Also, in a related point to king dollar, follow the money supply and industrial utilization. Production has been at zero or below. This is a big negative as well as the declines in retail. A large department store, Nordstrom (JWN) has been in a slightly uptrend, but the down days come with strong down volume. This could be a sign of distribution before the fall? This happened to Kohls (KSS). It was $27 last April and Friday closed at $14.36. Retail is the first solid indicator of the changing attitudes of the consumer. It has been a disaster for the last decade.
Media and Telecom
The consumer is also cutting the cord in their effort to fight inflation. Wall Street will be watching media and telecom closely. Overall, media is projected to a stabilized version. However, recent activity suggest big changes are coming. The big boys are hoping that Trump provides looser regulations. Trump is putting Brendon Carr as head of the Federal Communications Commission. He favors deregulation. The warchests are filling up. Warner Bros (WBD), Discovery and Paramount Global (PARA) took a $15 billion hit on their declining value of their cable companies. The linear networks are cutting costs and laying off people. Comcast is spining off its cable firms. All this points to having cash and where their future lies. They are not alone as Amazon and Netflix took a piece of the NFL. Verizon paid big bucks to acquire Frontier Communications for $20 billion. Meanwhile, Google and Microsoft are preparing for the future as they make their own chips and seek quantum. We gave that update in a piece last month.
Housing
We would be remissed if we did not include the biggest consumer putchase and heart of the American dream, home ownership. One word describes it, disaster. The average price for a home in the US is $420,000 as of September. When November ended, it rose to $430K. Our current morgage rates hover around 7%. This breaks down to about $3583 per month and that figure does not include taxes and insurance. To qualify, you need about $12,000 a month on income. This equates to a yearly salary of $144,000. The only people that I can think of who make that much bread are in the professions. This makes home ownership almost impossible. This obstacle stops social mobility. This is what is killing ordinary citizens. We know who the blame falls upon. This is why we say, "End the Fed!"
Immigration
Trump will do something. We believe private prisons firms will make money off of hardship. However, the truth is we cannot provide for the excessive number of people at the border. The proof is our rising homelessness. We need quality jobs and then, we will have room at the inn.
If you can find it on the internet, check out the new year celebration in Dubai. Got to be one of the best and a beautiful second to Sydney, Australia. Oh, yeah, Happy New Year! - Peace.
