Silver banana goes to…

In this issue of the peel:

• 📉 Sure, cool, whatever, the election happened. Today, we get back to the fun stuff as Fed Chair JPow and the FOMC are set to cut rates again today.

• 🚭 Tesla shares rip as the CEO’s boss just became President, while CVS got investors hyped on lousy earnings. Cannabis stocks burned up, while Dollar Tree is worried about tariffs.

• 🦅 The only one who had a bigger reaction to Trump’s win than the mainstream media was the financial markets. Find out how traders are sizing up Trump Round 2.

Market Snapshot

Banana Bits

• Vice President Kamala Harris called Donald Trump to congratulate him on winning the election, according to Unusual Whales at 1:40pm ET. They also reported that the campaign had otherwise been silent, but Biden invited Trump to the White House and congratulated him as well.

• Almost 3hrs later, Harris finally spoke to the nation at 4:25pm ET to concede the election to Trump while President Biden will address the nation today.

• Massachusetts voters, who enthusiastically legalized cannabis in 2016, rejected a ballot measure to decriminalize psychedelics like psilocybin. In other dr*g news, voters in Nebraska opted to legalize medical m*rijuana.

• Usage of X (formerly Twitter) hit yet another all-time high on Tuesday night.

• Honda sales fell victim to weak Chinese demand, sending shares lower on learnings.

• Qualcomm ripped after hours on strong earnings.

2025 IB Working Conditions Survey – Your Input Needed!

Are you working in investment banking? We want to hear about your experience!

Take a few minutes to fill out our quick survey and help us gather key insights into the working conditions of IB professionals in 2025.

Share your experience on work hours, mental health, compensation, and more!

Click here to participate: https://forms.gle/cLT9BKSwcXhSTSdM8

Your voice matters – let's make a difference in the IB industry together!

Smarter due diligence through better claims knowledge?

It only makes sense: if you know the current claims landscape, you can streamline your due diligence efforts by focusing on the areas that are most problematic post-closing.

To know that landscape, you’ll want to read the SRS Acquiom 2024 M&A Claims Insights Report. It offers exclusive analyses of indemnification claims from more than 850 private-target acquisitions valued at approximately $168 billion. As usual, this collection of data is available from the private-target M&A experts at SRS Acquiom and nowhere else. Get it now. 

Macro Monkey Says

Powell’s Newest Hire

Few things in this world are as excruciatingly annoying as training a new hire.

Luckily for Fed Chair JPow, his latest hire isn’t totally new—he’s just coming back from a four-year sabbatical.

We love to think of the U.S. President as the most powerful person in the world. But if Joe Biden struggling to eat an ice cream cone has taught us anything, it’s clear that’s not always the case, especially when it comes to the economy.

Let’s get into it.

What’s Happening?

What if I told you the election was only the second most important macro event of the week? I’d hope you'd say I’m wrong—because I am—but it's definitely not the only big event.

Today, the FOMC will complete its two-day policy meeting, where the U.S. central bank is widely expected to cut the federal fund’s target range by 25bps (0.25%).

For starters, today’s rate cut isn’t like the last one. Everyone and their dentist—and maybe even the mailman—knows a 25bp cut is coming, but key questions remain.

At the time of the 50bp cut in September, the big debate among the 19 voting members of the FOMC was whether there would be one or two more rate cuts by the end of the year. 

Although we won’t get a full answer on that today, the hope is that the Fed will give some details that will allow us to ask better questions about the path for rates and the economy going forward. My invite to today’s press conference must’ve gotten lost in the mail, but I’d ask:

1. Is the labor market as f*cked as the October jobs report and recent revisions suggest?

2. How, if at all, does the election change the policy path forward?

3. What is the “right” level for rates, and how do you define “right”?

Markets are pricing in ~70% odds of a 25bp cut today and another one to follow on December 18th. The scenario encompassing the remaining 30% includes a 25bp cut today and no cut in December.

However, the fixed-income market isn’t isn’t waiting to parse through JPow’s Fedspeak to start acting like they know the answers:

Long-dated yields jumped while short-dated yields retreated yesterday. We know why short-yields are on the way lower—rates are about to get cut later today and have a 70% chance of getting cut again in a little over a month.

Long yields, on the other hand, paint a mixed picture. 

Most outlets report the surge is due to higher inflation expectations in the long-term, driven by potentially inflationary tariffs from President Trump and a wider deficit from planned tax cuts.

But there’s also a good argument to be made that bond markets are expecting higher long-term growth. If markets believe in Trump & Co.’s ability to slash spending and get the national debt a little less absurd, government spending gets more efficient, raising GDP growth.

Further, policy normalization plays a role, too. In a normal economy, if such a thing exists, yields should increase with their term. 

Coming off the pandemic and the fastest rate hike cycle in history, no one really knows what a “normal” level of rates is at this point, but as cuts continue to pile up, deciding on that “normal” rate grows in importance.

The Takeaway?

Hopefully, Powell’s comments today clear up some uncertainty like the end of that torturous election did, but we’ll have to wait a few hours to find out.

The other big concern with Donnie T back in the O is Fed independence. Trump has insinuated—both as President and following—that the Chief Executive should get more say over the level of rates.

Horrible idea—just ask Arthur Burns how that worked out with him and Nixon.

… unless, of course, the Chief Executive’s plan is to floor rate to pump my portfolio… that I’m always on board with.

Career Corner

Question

I had a coffee chat with two people from the same firm at the same time today (I met a person through a cold outreach, and he brought his buddy along for coffee). Is it okay to send 1 email email to both, or should I send two separate emails thanking them for their time?

They both chimed in on all my questions, so it seems redundant to send two separate emails, but I thought I would ask.

Answer

I think it's fine to send to both of them, although when following up with them in the future, I'd start new chains in order to try and deepen the relationship with one or both of them.

Head Mentor, WSO Academy

Check out WSO Academy

What's Ripe

Tesla (TSLA) 14.75%

• Demonstrating his genius yet again, Elon’s move to become boys with former & next President Trump shielded shares from the massacre of renewable stocks.

• iShares Clean Energy ETF ($ICLN) lost 7.3% yesterday as Trump is viewed to be less favorable to renewable firms on subsidiaries and other federal benefits.

• So, the rip in Tesla shares is clearly a celebration of Trump’s win. It’s probably just hype because isn’t Elon supposed to join the new administration?

• If Musk does head up a government agency focused on efficiency, wouldn’t he have to step away from Tesla? If he doesn’t do that, wouldn’t Trump’s policies be less friendly to the firm than they are now? I guess we’ll find out...

CVS Health (CVS) 11.33%

• Impressively dogsh*t numbers from CVS somehow led shares to rise despite an earnings report that missed sales estimates and brought lower FY’24 guidance.

• The retail and health insurance giant delivered EPS of $1.83/sh on sales of $91.24bn vs estimates for $1.73/sh on $91.5bn. Major cost cuts are coming.

• The company will cut $2bn in expenses over the next few years, hyping up investors concerned about a profit squeeze due to runaway medical costs.

What's Rotten

Cannabis Stocks (MSOS) 27.66%

• Use of m*rijuana undoubtedly skyrocketed yesterday, but we can’t say the same for their stock prices. Hope for regulatory change just got ashed, I mean *dashed.

• Shares are getting smoked as Tuesday’s election nearly guarantees at least 2-4yrs before w*ed has a shot at federal decriminalization. 

• Plus, plans to reschedule cannabis to a Schedule III substance, which had been pushed back from August to December, could now fully go up in smoke.

• Lastly, voters in Florida and North Dakota rejected ballot measures to legalize recreational cannabis, while South Dakota is still pending.

Dollar Tree (DLTR) 6.53%

• I saw no trees and many items above $1 the last time I was misfortunate enough to find myself in a Dollar Tree. I asked for a refund, but should’ve just shorted the stock.

• Dollar Tree and other low-priced retailers saw shares eviscerate on Wednesday as traders fear the looming margin squeeze Trump’s tariffs could cause.

• But, shares in this dollar store are especially down because (former) CEO Rick Dreiling announced he was stepping down last night due to health reasons.

Thought Banana

Election Recap & Trading Trump

Wow. Like Ren from NWA, Americans said it with authority on Tuesday’s election.

Surprisingly, many of us actually know who won the election on the day of the election, unlike in 2020. Markets are already reacting, so let’s dive in.

What Happened?

45th President Donald Trump has won 277 electoral votes, above the 270 needed to win, and will become the 47th President of the United States on January 20th, 2025. 

Not all votes have been counted, but the race is over. The NYT projects a final electoral college count of 312 to 226, which would be the most dominant win since Obama in 2012. Check their electoral map as of 9:30am Wednesday:

Unlike Trump’s first election win in 2016, he actually did win the popular vote this time, racking up over 71mn votes so far to Harris’s 66mn. Further, as of now, the Republican party is poised to control both the Senate and the House of Representatives.

That’s what we call a clean sweep. Whether you like it or not, the market is already sniffing out ways to profit off of it. 

For starters, BTC reached an all-time high at 1:25am EST Wednesday morning at $75,701.87. The Republican party is considered more digital asset-friendly as part of their position for less regulation.

U.S. Dollar futures spiked as Trump’s plans around tariffs and immigration are seen as inflationary. Similarly, bond markets sold off long-dated treasuries on the expectation of higher inflation to come.

Meanwhile, oil prices dropped overnight as markets priced Trump’s highly technical energy production plan, 'drill, baby, drill!'

Lastly, U.S. equity indexes rallied overnight and into the morning trade, with the small-cap Russell 2k up over 4% by 9:45am.

The Takeaway?

Maybe the most important “Trump” trade was the collapse in the CBOE Volatility Index, often seen as Wall Street’s “fear” or “uncertainty” gauge. The index opened more than 22% lower to a fresh 6-week low.

As of now, there’s only one market impact from the Trump win that’s certain: a decrease in uncertainty. A Harris win would’ve had a similar effect on the VIX, I assume, but maybe to a lesser extent, given the fact that Trump’s been President before.

Most importantly, thank whatever God you believe or don’t believe in today for the simple fact that the election is over. We’re all winners in that respect.

The Big Question: How much of these early Trump reactions will be directionally correct throughout his term? Will Trump’s policies have the effects we expect?

Banana Brain Teaser

Previous

Carl averaged 2m miles per hour on a trip that took him h hours. If Ruth made the same trip in 2/3h hours, what was her average speed in miles per hour?

Answer: 3m

Today

How many integers between a and 16, inclusive, have exactly 3 different positive integer factors? (Note: 6 is NOT such an integer because 6 has 4 different integer factors: 1, 2, 3, and 6.)

Send your guesses to [email protected]

How Would You Rate Today's Peel?

Happy Investing,
David, Vyom, Ankit & Patrick

ADVERTISE // WSO ALPHA // ACADEMY // COURSES // LEGAL