MW How Trump's win and the latest interest-rate cut will affect you as a consumer, homeowner and investor

By Philip van Doorn

Also: Expensive stocks, a Medicare warning and another milestone for Nvidia

It wasn't all about the presidential election this week. Though the big news story came Tuesday night into Wednesday morning - when, after the votes had been counted, it was clear that Donald Trump would return to the White House - other trends in the financial world emerged.

First, let's start with what the next Trump administration might mean for your wallet.

-- Can Trump really lower prices? Here's what his second term might mean for your wallet.

-- What a second Trump term means for Social Security, Medicare and affordable housing

-- Get ready for a relatively quick extension of some 2017 tax cuts if GOP holds on to House

-- Trump has a 'super clear' mandate on taxes - but here's why it's not a done deal

-- Trump's win brings good news for savers

Trump and the stock market

Mark Hulbert explained why the customary stock-market indicators that pointed to a Democratic presidential election victory were wrong this time around.

As of Friday afternoon, it was clear that the Republican Party would gain a majority in the U.S. Senate, but the makeup of the House of Representatives wasn't finalized. With 218 seats needed for a majority in the 435-seat chamber, the Republicans had secured 214 seats, and the Democrats 203. Hulbert explained what a clean sweep for the Republicans or a divided Congress might mean for the stock market.

In the Ratings Game column, Steve Gelsi looked into an upgrade of $Bank of America Corp(BAC-N)$.'s $(BAC.SI)$ stock by Citi Research analyst Keith Horowitz, driven by the analyst's expectations for large-cap banks in light of Trump's election to another term as president.

An expensive bank stock: JPMorgan may be 'best in class' but it's time to take profits, analyst says

More from Hulbert: What the stock market can expect if Republicans control the White House, Senate and House

A bullish take: How 'Trump 2.0' could push this 'Roaring 2020s' stock market into the 2030s

The Fed cuts again - and will probably cut some more

On Thursday, the Federal Open Market Committee followed up on its half-point cut to the federal-funds rate with another quarter-point cut to a target range of 4.5% to 4.75%.

Here is full coverage of the FOMC statement and Federal Reserve Chair Powell's comments that followed.

There was plenty of speculation that Donald Trump's election victory might signal an early end to Powell's second term. Powell has served as Fed Chair since January 2018, after being nominated by Trump for the position in November 2017. Powell's second term as Fed chair will end in January 2026.

Despite initial support for Powell, Trump criticized him in 2019 for not lowering interest rates quickly enough.

On Wednesday, when asked during a press conference if he would resign from his post if Trump asked him to, or if Trump as president would have the power to fire him, Powell's responses were quick and to the point.

More coverage of the Fed:

-- Why the stock market can count on another Fed rate cut in December

-- Trump is not expected to try to fire Fed Chair Powell

The real-estate tycoon meets the new housing market

Aarthi Swaminathan detailed six ways a second Trump presidency will affect home buyers and sellers.

Related: Why mortgage rates could be heading to 8%, despite a Fed cut

Trump and exchange-traded funds

Following Trump's election victory, investors responded Wednesday by pouring a lot of money into exchange-traded funds. In this week's ETF Wrap, Christine Idzelis broke down the money flows and the strongest ETF returns, while also looking ahead when interviewing Bob Elliott, chief executive officer of Unlimited Funds.

When is a stock too expensive?

In news not directly related to the presidential election, we'll look at stocks of companies that are growing quickly. Some companies typically trade at high valuations to expected earnings or sales, when compared with a broad index such as the S&P 500 SPX. And for strong performers over the long term, investors can become comfortable.

But at some point, a stock's valuation might be too high, despite a company's success. This was the thinking behind a downgrade of Palantir Technologies Inc. (PLTR) to an "underperform" rating by Jefferies analyst Brent Thill on Wednesday. He called the stock's forward price-to-sales ratio "unsustainable," even though the developer of security software is expected to continue on a rapid growth path.

Read: Palantir's stock surges as AI drives a further acceleration in growth

Here is a three-year chart showing forward price-to-sales ratios for Palantir and Nvidia Corp. $(NVDA)$. The ratios are current prices divided by consensus sales-per-share estimates for rolling 12-month periods among analysts polled by FactSet:

Palantir's forward price/sales ratio was 37.5 as of the close on Thursday, up from 27.8 three years earlier, during which its share price rose 115%. Meanwhile, Nvidia's forward price/sales ratio declined to 21.7 from 26.2 over the same period, even though its share price rose fourfold.

Looking ahead at consensus estimates among analysts polled by FactSet, as adjusted for calendar years, the expected compound annual growth rate for Palantir's revenue from 2024 through 2026 is 22.5%, while Nvidia's projected sales CAGR is 33.4%.

Both stocks are expensive on a forward price/sales basis when compared with a weighted valuation of 3 for the S&P 500. But current valuations and sales-growth estimates would back an argument that Nvidia has a more compelling price than Palantir has.

Here is another look at stock valuations - this time for the banking industry - based on the opinions of Citi Research analyst Keith Horowitz and JPMorgan Chase & Co. $(JPM)$ Chief Financial Officer Jeremy Barnum.

The On Watch podcast: Is Big Tech running out of time?

Another big achievement for Nvidia

Nvidia was set to join the 30-stock roster of the Dow Jones Industrial Average DJIA after the close on Friday, replacing Intel Corp. $(INTC)$ in the venerable blue-chip stock index. One other change was scheduled, with Sherwin-Williams Co. $(SHW)$ to replace Dow Inc. $(DOW)$ as a component of the index.

Joseph Adinolfi looked further into what it might mean for a company to join the Dow.

Related coverage:

-- Nvidia's Dow nod is a plus - but this development could be an even-bigger deal

-- Vistra's stock extends lead as best S&P 500 performer of 2024

A warning about Medicare Advantage

Even if you are not close to being old enough to qualify for Medicare benefits, you surely know someone who does, and you should learn everything you can about the various Medicare programs - especially Medicare Advantage.

We are now in the annual "open enrollment" season for Medicare programs. Two weeks ago, Brett Arends explained how people can fall into what can effectively be a permanent trap if they make the wrong decision about Medicare Advantage. Beth Pinsker explained how children can be affected financially by their parents' Medicare decisions.

This week Arends looked into the federal government's ratings system for private Medicare Advantage providers and explained how the ratings are fundamentally flawed.

Super Micro is on the ropes

This chart showing year-to-date price action for Super Micro Inc. $(SMCI)$ through Thursday illustrates how investors or traders can make or lose a lot of money over the short haul:

On Wednesday, when Donald Trump's victory set the stage for the Dow Jones Industrial Average to rise more 1,508 points (or 3.6%) and for the S&P 500 to increase 2.5%, shares of Super Micro took an 18% dive. Here's a roundup of coverage and opinion about this company's problems from the MarketWatch Companies team:

-- Super Micro's stock tumbles, as one line was 'all investors needed to hear'

-- Super Micro still offers no clear answers to investors

-- Here's what Super Micro's struggles may mean for Nvidia and Dell

-- Super Micro needs a new CEO before its AI advantage erodes

For investors worried they missed the weight-loss-drug frenzy

Viking Therapeutics Inc. $(VKTX)$ is a pre-revenue company that keeps making good impressions in drug trials for the oral weight-loss medication it has under development. Here are this week's latest developments for Viking, as reported by Ciara Linnane and Steve Goldstein.

Want more from MarketWatch? Sign up for this and other newsletters to get the latest news and advice on personal finance and investing.

-Philip van Doorn

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

November 08, 2024 15:13 ET (20:13 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.