Things are changing fast, keep up!

We all saw this coming: Joe Biden stepped down and nominated his vice president, Kamala Harris, to contest the presidential election in November. Donald Trump selected J.D. Vance, a 39-year-old hillbilly, to be his running mate. What effect will this have on your investments? To answer this question we have to understand American politics and we haven’t got time to do that, but understand that Kamala Harris is stepping from Joe Biden’s shadow into the light, and a conservative unknown with a troubled childhood is stepping into Donald Trump’s shadow.

It is very likely that Kamala Harris will continue with most of Joe Biden’s policies if she gets the Democratic Party vote and is elected president, but with an extra dash of liberalism. It is said that she has proven in the past to be someone who will sacrifice excellence in favour of mediocrity, resulting in a weakening of what makes the USA so competitive. On the other side we have J.D. Vance. Although a vice president does not have such a direct impact on policy, especially if the president is someone like Donald Trump, it is still important to understand the potential future impact. J.D. is young, intelligent, conservative and leans more towards protectionism, in which case – as with Trump – trade wars with China is very possible. J.D. wrote a book about his life, which was made into a movie currently screening on Netflix called “Hillbilly Elegy”, go take a look.

On the investment side we have seen big tech companies in the USA getting a fat slap and to add insult to injury, getting a kick from small cap shares. US Small Caps are up 7% over the last 10 trading days while US Large Caps are down 4%. The 11% spread is the largest 10-day Small Cap outperformance ever. We saw Nvidia down 17% from July 10th, Microsoft down 10% and Amazon also down 10%. It has to be said that the so-called Magnificent 7 stocks are still up 33% year to date. It is very likely that this rotation out of the large cap shares into smaller cap companies will continue. This is healthy as far as investments go because it will alleviate the risky concentration we have seen in the American stock market.

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