As we’ve discussed throughout the year, small cap stocks have lagged the broader market.

The S&P 500, Nasdaq and Dow all surpassed the record highs of 2021 around the beginning of this year, and have carried on to much higher highs.  Meanwhile the Russell 2000 (small cap index) was still down almost 20% from its 2021 high just a couple of months ago.

But these underloved, if not left for dead stocks have ripped higher since election day, and the Russell 2000 is now back at record highs.

Remember, in my October 28th note, we looked back at the 2016 post-election performance of the Russell, in the two months following the Trump win.  It outperformed the S&P by more than 2 to 1 (+17% vs. +8%).  It’s on the path again.

And last week we talked about the 2016 election analogue in bonds, where the Trump agenda fueled a rise in the 10-year yield — on growth prospects, not inflation fears.

Likewise, in the 2024 election the 10-year yield went up as the probability of a Trump win went up, and it rose more sharply last Wednesday on the Trump victory (almost a quarter point).

And consider the sharp decline in the price of gold since election day – the historic inflation hedge.  It’s down 5% in four days, which seems to be expressing a view that the reckless fiscal policies are coming to an end.  That includes blank check foreign war funding, student loan forgiveness, and open-ended climate agenda spending.

Meanwhile, Bitcoin has traded to new highs, up 32% since election day.  Why?  It’s not fears of an inflationary Trump agenda.

Trump has floated the idea of holding bitcoin as a government reserve asset.  But far more important than that, Trump is simply not an existential threat to bitcoin, like the current administration.

In this prepared speech back in April of 2022, Biden’s Treasury Secretary, Janet Yellen, gave a clear warning for the “private crypto” market.  We talked about this in my daily notes a couple of years ago.

She said the history of money in the United States was littered with attempts at different forms of private money.  She said it (private money) didn’t work, and they regulated it away.

Their plan for bitcoin was to do the same, and strengthen their monopoly on money through a well telegraphed “central bank digital currency” (a digital dollar).  The Trump presidency changes that outlook.

What else is quickly pricing in an outlook where government regulators are no longer a predatory risk?

Tesla.