The stock market is a futures market. It’s mostly about what is going to happen next. But it starts with an analysis of what things are like now and what’s likely to change.

I think history will remember three things about Trump:

–the attempted coup, which as far as we know today was: not a spur-of-the-moment thing, planned by his former campaign staff, abetted by Congresspeople who gave Capitol tours to conspirators and texted updates during the insurrection, justified by lies about voter fraud, aided by hostile foreign governments.

–the economic devastation caused by the “it’s a hoax” approach to the coronavirus: GDP decline worse than in 2009, with the death count at 400,000 and rising by 3,000 daily. And the US appears to be running out of vaccine.

–an economic policy that discourages innovation and has likely cut GDP growth potential in half.

For us as investors, I think the third is by far the most important.

If so, the key questions are:

–how quickly can Biden reverse Trump’s ill-conceived economic program, and

–how soon will the stock market begin to discount better times ahead.

For me, a key indicator is the spread among the Russell 2000, the S&P 500 and NASDAQ. Since the election, the clear winner among the three is the Russell 2000 +32%). NASDAQ is in second place (+13%), with the S&P (+10%) a close third. After wobbling a little on the morning of the 6th, the pro-Russell trend has, if anything, accelerated.

Year to date, the figures are: Russell 2000 +8.5%, NASDAQ +1.8%, S&P +1%.

I really don’t like talking about my own performance figures–purely superstition. But I’m up about 7% so far in January, despite having a very NASDAQy portfolio. I’m not 100% sure why.

I have two hunches, though:

–the ocean of liquidity (which would never be here if Trump weren’t so epically dysfunctional) is allowing smaller, speculative, secular growth names to become more visible. Maybe this is just substitution of Robinhood for sports betting and will disappear as the coronavirus comes under control (but maybe not).

–the other is that the market is thinking (correctly, in my view) that we’re not going back to anything close to the former status quo. If so, the S&P has a lot of baggage to get rid of. This suggests that jettisoning losers will likely be at least as effective over the coming months as finding winners (not a big insight–this is usually the case–but still a useful reminder, I think).

PS: GM is up by almost 30% year-to-date, despite its fifty-year history of ineptitude and its recent flirtation with Nicola, a company whose story reads like the emperor’s new clothes. Maybe there’s something to GM this time around. If not, it’s a signal that the secular growth/capital flight theme that’s been driving the stock market since 2018 is veeerrrry long in the tooth.

–As of this morning, I qualify to receive the coronavirus vaccine, along with every other 65+ person in the US. The biggest problem with my new status: there is no vaccine in the hands of the shot-givers in NJ and may not be any for months. What I find interesting about this is that it’s an illustration of the importance the views of the person in charge have in influencing, consciously or not, everyone who works for him/her.

The Trump narrative is that the coronavirus is a hoax. Because of this, any subordinate who works on, say, creating a well-oiled distribution machine for vaccine is not just wasting time but visibly asking for trouble. The result is at best what I’m experiencing now–a medical potemkin village. A viable distribution system will only start to be built next month, when the incoming president signals that working on this is ok.

A similar kind of hardening of the arteries happens with companies, as/when early-stage entrepreneurship is replaced by professional bureaucracy. Intel is a current example, in my view. GM and Ford are others. Pre-Iger Disney is a fourth–although DIS is also a great example of how having the right person at the top can revitalize a sleeping giant in short order.

–the story of the Trump-incited riot in the Capitol building continues to develop. Annapolis graduate and former prosecutor Rep. Mikie Sherrill reports that the day before Trump incited the attack Republican Congresspeople led rioters on a “reconnaissance” tour of the Capitol. Also, a Republican representative appears to have texted rioters updates on the location of Congresspeople during the attack. Trump’s toneless, my-lawyers-made-me-do-this reading of a statement asking for an end to violence implies that he had further riots planned, if needed, for MLK weekend and the inauguration.

What strikes me is that the US is almost blase about Trump’s continuing attempts to subvert the election, including using violence. We figure it’s just another day of Trump being Trump. The rest of the world, in contrast, is horrified by what’s happening. It smacks of the 1991 (or 1993) Soviet coup attempt. My sense is that’s the image Europeans have, as well. China is chortling, while the rest of the Pacific is appalled.

Purely as investors, we’ve got to assess how badly Trump-as-Putin-wannabe damages the desire of the rest of the world to acquire goods and services from US companies, or to visit, work or go to school in the US itself. This can’t be a good thing. The question is how bad, and for how long. I don’t think we have enough information yet. As I see it, Wall Street is so far doing what it usually does–trying to find areas where this doesn’t make much difference.

I was watching CNBC yesterday afternoon.

Regular readers know I think the presenters there are by and large actors pretending to be market analysts. On the other hand, there’s the weird thing for investment managers that potential (and actual) clients regard an appearance in what is in effect a soap opera as a powerful endorsement of their professional competence. So CNBC often has surprisingly good guests.

That wasn’t the case while I was watching yesterday. But there were graphics that illustrated the (surprising to me) strong performance of big car companies since the election and the fact that retail stocks are up about 12% so far in January.

I did some poking around and this is what I found. Since the day after the November election through the close on January 12:

Tesla +92.7%

Russell 2000 +31.8%

GM +27.7%

Target +24.7%

Ford +21.7%

S&P 500 +12.8%

NASDAQ +10.3%

Walmart +3.8%

Dollar General +1.0%.

Over the past 52 weeks, Ford is up less than a percent and only Tesla (+748%) and Target (+57%) have outpaced the +42% gain of NASDAQ.

How do I read what’s going on?

–there’s been a dramatic shift in the market since the election away from multinationals and toward domestic names, as the upturn of the Russell 2000 vs. the S&P for the first time in three years shows

–left-by-the-wayside names like GM and Ford are suddenly showing some life. This is startling. Over the past five years, the S&P is up by 137% and the R2000 by 111%. In contrast, GM is up by 52%, or less than half either index, and F is down by 22%. So, yes, the R2000 is dragging these two up with it. But I also see this as an indicator of sky-high valuations elsewhere if domestic carmakers look like attractive investments

–Walmart & DG vs. Target. The least affluent Americans typically go to local stores that aren’t on the stock market map. The dollar stores are one level above that. WMT is another level higher, with something like a third of its customers low-income. TGT is somewhere between WMT and traditional department stores.

When time are bad, consumers spend less and shift to lower-price alternatives; when times are good, they gradually reverse this behavior.

Personally, I’ve begun to notice that consumer electronics items and photography gear is sometimes cheaper from WMT than either AMZN or B&H. So I’ve begun to use WMT more. My guess, though, is that I’m way, way in the minority on this.

The way I interpret the price action of these three big retailers is that the market is figuring that pandemic help is on the way under Biden and anticipating a cyclical shift to more upscale that is yet to occur.

my bottom line

I think the retail stores are signaling that the market thinks better economic times are in store under Biden.

The domestic autos, on the other hand, are sending the worrisome valuation signal that for some professionals they’re all that’s left that’s buyable.

The death toll from the Trump-incited riot on Wednesday is now five: one rioter shot to death, three apparent rioters dead from heart attack/stroke, and one policeman dead from being bludgeoned with a fire extinguisher by rioters. The Capitol police chief whose department ignored social media discussion of plans for a violent attack on the Congress has resigned. No explanation yet for why the administration initially refused police requests for National Guard reinforcements. Bizarre tweets by Republican legislators blaming the riot on antifa and BLM, which serve only to underscore the narrative of Two Americas. An occasion for fund-raising by Josh Hawley.

Yesterday Trump made a grudging public statement, which the Wall Street Journal called too little, too late. It was more revealing for how little was said. No acknowledgment that Biden had won the election–only admission that due to the Congressional action he was unsuccessful in disrupting, a new administration would take office in two weeks. To my mind Trump said the minimum necessary to avoid being removed from office by his cabinet, a number of whom have already resigned, apparently in order to avoid having to vote on whether to remove him.

What a mess. A huge black eye for America throughout the world.

Putting on our investor hats, however, the salient fact is that the coup attempt failed, thanks in large part to Mitch McConnell and Mike Pence.

The immediate market reaction in stock prices, as I read it: a shift in interest away from the Russell 2000, Industrials and Consumer discretionary toward health care–genomics firms in particular–and financials. It’s hard to know how long this will last, but the move seems to me to be a new hesitation to bet that Trump’s growth-inhibiting economic policies will disappear once he leaves office. I don’t get the logic–my guess is that Trump loses a lot of influence once he’s not The President–but that’s what yesterday’s prices are saying to me. Let’s see what today brings.

Yesterday a mob organized and incited by Trump broke into the Capitol in Washington with the supposed aim of somehow compelling Congress to overturn the results of the November election and declare Trump the winner. Trump’s earlier efforts to achieve the same goal, through 60+ lawsuits and arm-twisting legislatures in battleground states, had all failed to establish anything other than that the original outcome was examined again in detail and found to be correct–a victory for Biden of the same magnitude as Trump’s defeat of Hillary four years ago.

My question: what did Trump think he had to gain from the assault? I can understand the bogus fraud claim. It was/is a fund-raising scam in which supporters send him money to “fight the steal,” while not noticing the fine print in the solicitation reveals the lion’s share of the funds go into Trump’s PAC for his future use instead. He also had graduates of elite universities and law schools like Cruz and Hawley already eager to inject his craziness into Congressional debate. Trump clearly wanted the disruption that occurred, since he refused both to try to defuse the situation and to send law enforcement support to outnumbered police on the scene (Pence did the second).

On Wall Street, home to many wealthy Trump supporters, the reaction, as far as I can see, is embarrassed silence.

The reaction of the stock market, in contrast, is relief. The focus is on the fact that Trump’s attempt to subvert the election and remain in office has lost most of its support and that Biden will be president in two weeks. At the very least this means that after close to a year and what will likely be 400,000+ US deaths from the pandemic, Washington will finally begin to fight it rather than spread it. It also means the 30% or so that Trump’s looney-tunes economic policies have clipped off the GDP growth rate will begin to be restored.

The main thrust of today’s trading so far, though, has been on the surprising double Democratic senate win in Georgia. To the market, this implies higher deficit spending from Congress, which implies higher interest rates–which is good for bank profits.