We’ve recently added to our U.S. versus Rest of the World position in Nasdaq versus Hang Seng futures, capitalizing on the resurgence of the Trump trade. Our U.S. vs. ROW trades are performing exceptionally well.

We’re still somewhat surprised by the ongoing divergence between the “drill, baby, drill” narrative and the “deficit spending” narrative. This contrast can’t last forever, but for now, it continues to work. USD assets remain the place to be. We’re staying focused on U.S. politics: last night brought news that Vivek Ramaswamy and Elon Musk will be heading the aptly named DOGE — the Department of Government Efficiency. In all honesty, this could range from genius to ridiculous, but it’s at least a tangible attempt to rein in government spending. Politically, it also creates a framework for managing the debt ceiling discussions, potentially shielding Trump from the issue.

If Republicans in Congress stir up debate over the debt ceiling in 2025, Trump can simply point to Vivek and Elon and say, “Don’t worry; give us two years, and we’ve got this.” In essence, any major outcry over the debt ceiling would challenge Elon and Vivek’s efforts — a bold move in today’s climate. Politically, this may turn out to be a stroke of genius.

Chart 1: Adding long Nasdaq vs short Hang Seng

The Q4 2024 SLOOS came out late yesterday evening CET and overall it is a mixed bag post rate cuts. The survey found that the lowest % of lenders reported tightening lending standards for large and medium-sized firms since Q2 2022 at 0.0%. However, lending standards for smaller firms actually tightened with 13.3% of respondents tightening in Q4, up from 8.2%. On a mean basis both firms and households are back to reporting tightening standards that are in line with pre Covid numbers. 

Chart 2: Mix bag from SLOOS

Later today CPI drops marking the last release of the year in which the seasonal adjustments have a dovish tilt and from a historical point of view October has been a softer than consensus month. It will likely end up being the same old foes from core services that keep the print elevated. With its current pace from its peak shelter is expected to return back to pre Covid levels in the beginning of 2026 and motor vehicle insurance will be around pre covid levels in 2027.  

Chart 2.a: Historically Oct is a below consensus month

Chart 2.b: Shelter to return to its pre Covid norm by ‘26

Chart 2.c: … and insurance by ‘27

Scott Bessent, who is likely to become Treasury Secretary, has outlined a “3-3-3” economic plan focused on achieving 3% real economic growth through deregulation, reducing the budget deficit to 3% of GDP, and increasing U.S. oil production by 3 million barrels per day. This economic approach appears designed to reassure markets that Trump’s policies will be more disciplined than expected, emphasizing sustainable growth, fiscal restraint, and a boost to domestic energy production to help contain inflation. With easing inflationary pressures through lower energy prices, calls for lower yields will be louder as Bessent’s 3% target would be hit if interest expenses are deducted from the federal budget balance. Also given the stickiness and slow feed through effects of core services, energy is a neat way for the Trump admin to get the headline print down. 

Chart 3: Trump and his administration to put pressure on Powell to cut? 

Make America Healthy Again…

Robert F. Kennedy Jr. is predicted to have a leading role in Trump’s administration overseeing health and agriculture policy. Albeit this role might not be as Secretary, he has stated. The X-space is filled with rumours and fancy ideas of what he will do once appointed, so we though we’d take a look at what he has actually said. Essentially, RFK has said that Trump has tasked him with completing three goals:

1. ‘Drain the swamp’ and purge U.S. federal health agencies – This is likely at the top of RFK’s ‘to-do list’ when in office. The purge includes the FDA, CDC, and NIH for alleged ‘corrupt’ civil servants who are in the pockets of big pharma and big agriculture (which he blames for allowing ‘toxins’ in American food products). RFK wants to gut entire departments in the FDA (Food and Drug Administration), including the nutrition department, thereby following in the slipstream of a main focal point of the Trump campaign – purging and politicizing the civil service apparatus.
2. Return the FDA to being ‘the gold standard’ of health research – RFK believes the ‘corrupt’ FDA has moved away from evidence-based medicine approvals due to corporate interests influencing the agency. RFK has previously been critical of trials that sought to approve Ozempic for conditions other than diabetes, including sleep apnea, kidney and heart diseases, and addiction. This could indicate stricter approvals for medicines, whereas RFK has promised better support for ‘alternative’ treatments.
   He states that his ambition is not to ban medicines and vaccines already in use today but to make Americans better informed about their options.
3. Fight the ‘chronic disease epidemic’ and MAKE AMERICA HEALTHY AGAIN – This is RFK’s raison d’être. He wants to fight obesity and neurological disorders, particularly in children, and Trump has demanded to see measurable results within two years. RFK has been extremely critical of big pharma lobbying for medical treatments rather than supporting preventive measures like better food products and exercise. He has singled out Denmark and Novo Nordisk for not recommending Ozempic to treat diabetes domestically but pushing the product in America. RFK is also passionate about
   banning TV ads for pharmaceuticals (the U.S. is one of only two countries currently allowing them). The former Trump administration already tried to do this but was defeated in court. Nordisk launched an aggressive advertising campaign, spending a total of $471 million to market Ozempic and Wegovy in 2023.

Perspectives for Big Pharma

Trump’s demand to see measurable improvements in obesity might be the saving grace for weight-loss drug companies. Products like Ozempic are already widely used in the U.S., and consumers want to see prices go down (see poll by KFF). This doesn’t harmonize well with a big regulatory burden or tariffs. What Trump is likely to do is force/negotiate with big pharma companies to lower prices.

TRUMP QUOTE: “Under my policy, the United States government will tell Big Pharma that we will only pay the best price they offer to foreign nations, who have been taking advantage of us for so long.”

He already attempted a similar measure in 2020 with the ‘most favored nation system,’ which would have made an international reference price for some Medicare-covered drugs. However, this initiative was blocked in court. RFK has also been critical of a Democratic initiative to include weight-loss drugs in Medicaid (Obamacare) coverage. Given Trump’s ambition to cut federal spending, this initiative is likely dead in the water. On the other hand, big corporations might face less scrutiny in major M&A activities. Novo’s attempt at buying Catalent received massive pushback during the Biden presidency, but Trump’s anti-regulatory stance could ease future ventures. Overall, the big challenge for the Trump administration is to balance anti-regulation/deflation promises with increased scrutiny of big pharma and big agriculture. This is likely to pit Trump and RFK against each other (RFK might be a good bet for an early Trump firing). With the number of legal guardrails and money spent on lobbying eGorts, I project big corporations to come out on top.

Be sure to check out the rest of our Trump Administration coverage:

The Drill – Trump’s impact on oil
Positioning Watch – What if Trump leads to lower bond yields?
Espresso: The Trump Trades Are Through The Roof
China/Germany Flash Watch: How will China navigate the Trump victory?
Crypto Moves #51 – Trump’s Win: A Game Changer for Crypto