Look Outside the US

The idea: Investors should start nibbling at non-US assets. I like European industrials, Japan and emerging market exchange-traded funds. Diversify your bets and add exposure to all three once the dust settles — at some point in mid-2025 — on fiscal and trade policies.

The strategy: Investors have responded to Trump’s victory by essentially replaying the 2016 playbook: go long small caps, long the US dollar, short anything not domiciled inside the US. I think this is a massive mistake. President Trump does not have a mandate to add more nominal GDP growth. He has a political mandate to curb prices. As such, expect bond yields to act as a pressure on profligate fiscal policy. That will arrest America’s main growth engine over the past four years: A fiscal policy advantage relative to the rest of the world. With unchecked migration also about to be curbed, the US may begin to underperform.

If you think the US will continue to outperform over the next four years, then I have two far simpler trades for you: Bitcoin and Tesla. Yes, it really is that simple. There haven’t been two tickers so closely associated with the White House in the history of the US.

The big picture: With profligate US fiscal policy and unchecked migration coming to an end, the US advantage in growth versus the rest of the world should lessen, and that would see the US dollar depreciating and more strength in global assets.

Explore Diverse Niches

The idea: I would split the million evenly between insurance brokers, investment banks, nuclear companies and senior secured private credit.

The strategy: The argument for property/casualty insurance brokers is that global warming and extreme weather conditions have insurance rates going up, and these companies’ commissions are tied to insurance rates. With investment banks, the M&A environment will likely improve next year with less regulation, and these companies are positioned to earn higher fees. I think it will be a more laissez-faire environment for deals.

With nuclear companies, the US finds itself trailing Russia and China in nuclear advancement and technology on the power side. This year, the government has been trying to play catch-up, and perhaps a new administration will be more favorably inclined to help this industry move forward. AI energy demand is part of the argument for nuclear, but it actually solves a lot in that it’s arguably clean energy — an alternative base power that doesn’t rely on the sun and wind, which are obviously transitory.

The last $250,000 would go into senior secured private credit — we have it as part of a private partnership. It’s floating-rate and the yields are near 11% — it’s going to beat stocks next year. You’re lending to middle-market companies that banks have pretty much turned their backs on. Many people who used to underwrite for the banks are moving to private credit funds and lending to these companies.

The big picture: My biggest worry is valuation. US large-cap stocks and the S&P 500 in particular are overvalued by 25%. That can’t be made up by earnings alone. Expensive markets can stay expensive and other metrics we track are still pretty positive. But if I’m allocating new money I’d probably steer away from the Mag 7 and mega-cap tech, where I wouldn’t be surprised if we saw a replay of 2000 — all it takes is a catalyst. It’s a dangerous valuation environment.

Invest in Auto Electronics

The idea: We’re seeing opportunity in the automotive value chain, where there’s a lot of disruption and we can buy companies with strong secular growth trading at cyclically depressed valuations. Whether it’s an electric or internal combustion vehicle, more and more internal content inside the car requires an electronic brain to operate — more safety sensors, more driving aids, autonomous driving. Companies in this area with proprietary solutions include automotive technology supplier Aptiv Plc and semiconductor company Infineon Technologies AG.

The strategy: Battery EVs have up to three times the value of electronic content as internal combustion (IC) vehicles. Yet it is not a linear relationship, where you need to rely on EV penetration happening quickly — every year more electronic content is going into cars. The dollar value of electronic content of IC vehicles is growing more than 6% annually just to support increased safety features.

Aptiv’s specialty is providing the systems where cables connect and talk to each other. Half of Infineon’s revenue is auto-related, but they are a play on all electrification providing power transfer product solutions to renewables, automation and AI data centers.

The solutions provided by these companies are considered industry-leading. There’s no better proof than their market share gains in China, a market known to favor domestic suppliers. Their strong market position underpins these companies’ ability to generate well-balanced profitable growth, which is tied more to auto sales volume than auto prices.

The challenge this year is that cars haven’t been affordable so volume is low. This will change because OEMs (original equipment manufacturers) will redesign vehicles to be cheaper but will keep this electronic content that differentiates them. There is an expectation that there will be a pickup in European EV sales because you have new affordable vehicles coming onto the market.

The big picture: Auto production levels are down 2% and we expect them to be flat next year. But global battery EV production can grow by 20%. When you have that production and cars that use three times the electronics of IC vehicles, even if you lose production of IC vehicles, you’re still growing significantly. Aptiv and Infineon can outgrow the production market by the mid-to-high single-digits.

Focus on Infrastructure

The idea: We see opportunities in infrastructure — across transportation, energy and maybe most importantly in digital infrastructure such as data centers and communications technologies.

The strategy: Trump has expressed intentions to invest in national infrastructure projects, which could benefit companies specializing in construction materials, engineering and infrastructure development. Given Trump’s promise to impose new tariffs on imports, US producers will require operational and financial support as the US transitions away from imports and towards domestic production. There will be a re-shoring tailwind, if you will.

With digital infrastructure there’s a compelling crossover between the ever-talked-about AI trend and the building that will be required to support what we think is the early innings of AI and its implications as a longer-term investment trend. The US is undergoing a massive buildout of AI data centers, and there are constraints that go along with that — access to electricity is one. We think the Trump administration could potentially prioritize the importance of nuclear energy as well as traditional fossil fuels.

The big picture: The actual rollout of the infrastructure law passed under Biden is still in its infancy, so there’s probably a decade-plus of rollout still. I think Trump could end up supporting the rollout of these projects despite suggesting he may repeal parts of the laws enacted under President Biden. Many projects are set to take place in states that swung to support Trump in this election cycle.