Trump's Return Shows Crypto May Be Single Biggest Force in U.S. Politics

We are only a few days into the second term of the Trump presidency, but so far, so good.

This administration if more fully staffed on this day one than last time and it's filled with people who are committed to his causes. That is very different than last time. The level of preparation is not only far better than his first time, but seems even more pulled together than Joe Biden had when he took office. Depending on which direction the administration goes, this might be good or bad, but make no mistake, Trump 2.0 is far more prepared and ready to act.

We’ve had the first (of what could be many) “personality clashes” in the administration with Vivek Ramaswamy stepping away from Elon Musk and DOGE. With so many prolific, high-energy individuals, we should expect to see clashes. The only one that could manifest itself in a way that would be tough for markets would be if the Trump and Musk relationship goes sideways. There is a comfort level associated with the richest man in the world helping form and guide policy – from a markets perspective. If that gets tested, it could be trouble, but again, so far, so good.

Trump seemed almost like two different people. One very “presidential” at the official inauguration, the other, far less so, at the almost “campaign rally” atmosphere at later events on inauguration day. So far, from the policy side, we have seen:

• Some chatter on tariffs, but little being done. It seems obvious to everyone now that this has become a negotiating ploy. That he is talking about it to rally his supporters but is listening to those who caution him about being too aggressive or too preemptive. It looks like we are just starting the negotiations. Have said that, be prepared to see some retrenchment on Trump’s part, though at this point, it might take actual actions rather than words to move markets.
  
  
  
  
• Immigration policy seems to be starting off “reasonably” (in my opinion). Enforcing the borders, etc. and little obvious attempt to round up millions of people, especially law-abiding people, to send them back. I actually like the tactic of elevating the drug cartels to terrorist organizations, as that could be a big step toward Mexico and the U.S. really taking them down. That would solve so many issues (we’ve discussed “ungoverned space” in this context as well). A solution to the cartels helps the U.S. and Mexico and would set the stage for real growth.
  
  
  
  
• China. Trump seems to want to “deal.” No day one tariffs. No ban on TikTok. Bizarrely, this makes me nervous, as I expect China to try and find a deal that bides it time. That lets it get through its current economic issues, while setting it up for the future (from AI, to high tech, to controlling shipping, to selling their brands globally, with the backing of China Inc.).
  
  
  
  
• AI and compute. The investments announced on Tuesday are very positive. What is possibly as important as the investments themselves is the signal those investors are sending. There is a “bandwagon” building and people want to get on. That could propel forward similar plans from others. I’m hearing “Roaring '20s” more and more in my conversations.
  
  
  
  
• Crypto, with the SEC setting up a crypto commission, with the pardon of the Silk Road founder Ross Ulbricht, with the launch of multiple memecoins by the president and those surrounding them. With all those “withs” it seems plausible that a serious push is made for a crypto reserve. Makes zero sense to me, but I wouldn’t fight it. While this might be a stretch, the contributions from the crypto community might be the single biggest force in U.S. politics. Sam Bankman-Fried clearly influenced the midterms before he fell. The crypto community clearly influenced the last election, and I expect they are just spreading their wings. Lots of access to wealth (some of which may not be traceable), potential new means of generating wealth for those they want to support (memecoins), a passionate goal (higher and higher crypto prices) and in many cases some flair. Everyone politician must be thinking (or should be thinking) about how to tap into this force! I have not bought any crypto (or crypto ETFs) since the election, but am tempted too, because whatever I think, I’m not donating millions and many in this administration have been strong believers in crypto for a long time.
  
  
  
  
• Peace through strength. I’ve seen little on the military front that has caught my eye. Though I believe we will see successes in the Middle East and with Russia and Ukraine. We will return to a state where U.S. deterrence does just that – deter! From Bloomberg TV last week: "Trump’s Defense Chief Must Restore U.S. Deterrence." I am going to be adding some European stock ETFs to my portfolio in the coming days, on the back of this expectation, along with positioning.
  
  
  
  
• Commodities. From “drill, baby, drill” to “refine, baby, refine” we are in the early stages of actions that will change the commodity space. The president (rightfully so) argues that lower energy prices will keep inflation lower. I agree as energy prices affect everything from the manufacturing costs to the delivery costs. More broadly speaking, lower commodity prices, lower prices for goods (and potentially services, as a byproduct of services spending less on the equipment they need). I don’t like owning the commodities and the commodity producers should do well, but that might be tricky. Companies supplying the goods and services producers need should do well. From heavy equipment makers, to oil field servicers, to anyone in infrastructure. As awful as the fire in Los Angeles is, it may help set the stage for changing regulations, that may have made sense, but in hindsight have risk and may deter progress.
  
  
  
  
• The deficit. I see zero progress on this front, but for the past few trading sessions, the bond market has ignored the risk and has largely dismissed risks. The efforts to keep commodity prices down have probably helped, along with reduced fears of a tariff war. Having said that, look for yields to rise again, with my target being 4.9% on 10s.
  
  
  
  
• Work from office. I like commercial real estate here as everywhere I look, work from home is going back to being a luxury for the employee, rather than a requirement employers are forced to offer.

So far, so good, but don’t forget the theme of 2025 — “messy.” So, as things look rosy, prepare for some negative headlines, and when things seem gloomy, expect the narrative to change more positive.

Should be an interesting year, but so far so good.

At the time of publication, Tchir had no positions in any securities mentioned.