- SkyBridge Capital's Anthony Scaramucci benefited from risk assets' postelection rally.
- However, the outspoken Trump critic thinks there's an outside chance that stocks crash.
For never-Trumpers like Anthony Scaramucci, the days since the election have been somber.
For Scaramucci's bitcoin-heavy portfolio, it's been anything but.
Bitcoin has caught fire in the wake of Donald Trump's presidential win. The so-called digital gold is up more than 23% since November 5 and almost 40% from its mid-October low, which is when the crypto-friendly candidate had started to gain major momentum in betting markets.
Scaramucci, who was Trump's White House communications director for 11 days in 2017, didn't see his former boss's win coming — and he wasn't happy about it. But he can't deny that this election outcome has been lucrative so far for him and his team at SkyBridge Capital.
"That's the irony of life," Scaramucci said in an interview with Business Insider late last week. "I was against him, but ironically, he's enriched our portfolio."
Millions of other investors can say the same, regardless of how they voted.
US stocks have been on a tear since Trump's win. The S&P 500 is fresh off its best week of 2024 after rising nearly 4% since the election to record highs, and the Nasdaq Composite and Russell 2000 have climbed by even more.
Although it's unclear whether the renewed rally is sustainable, the rationale behind it is simple: Wall Street is counting on fewer regulations and lower taxes under Trump, or no tax hikes at the very least. The market seems to see Trump as "pro-growth, pro-deregulation, and pro-markets," as investment chief David Bahnsen recently put it.
Why the market could turn on Trump
When asked for his take on this jaw-dropping market rally, Scaramucci said it only happened because investors aren't taking some of Trump's most aggressive economic policies literally.
"Wall Street goes into the bucket of people who don't believe him," Scaramucci said.
To be sure, cutting the corporate tax rate from 21% to 15% would juice earnings, Scaramucci acknowledged. There may be debate as to whether the burden it could add to the national debt, but it's hard to argue that stocks would get at least a near-term boost.
"The revenues of that company drops right to the bottom line," Scaramucci said. "They can use that for share repurchase; they can use that for dividends; they can use that for earnings."
However, Scaramucci is worried about Trump's other economic proposals, and he's not alone.
"Let me tell you something: If Trump enacted 50% of what he's saying, you'll have a stock market crash, the likes that you haven't seen since the 1920s," Scaramucci said. "And by the way, don't go by me — Elon Musk is saying that."
Scaramucci was referring to the world's richest person's agreement with a post on X that said Trump's plans to deport millions of illegal immigrants and cut spending would cause a market meltdown, since it may spark a labor shortage that makes inflation reaccelerate.
Sounds about right
— Elon Musk (@elonmusk) October 29, 2024
"You want to deport 15 million people? You'll crush the economy; you'll crush our tax revenues; you'll flip upside down the job market," Scaramucci said.
It's not just Trump critics who have those concerns.
Tom Orlik, the chief economist at Bloomberg Economics, said in early October that Trump's plans for mass deportations and massive tariffs could cause "seismic shocks" to the economy. And Orlik wasn't being a Trump hater, as he had said that a Trump administration with similar policies as the first, including less taxes and regulations, could be a strong backdrop for stocks.
David Kelly of JPMorgan Asset Management has also warned that the president-elect's aggressive tariff plans would also hurt growth while fueling higher inflation. A trade war is one of his top risks, as he told BI last week that "a tariff for a tariff will make the whole world poor."
The challenge for investors, in Scaramucci's view, is figuring out which Trump the US is getting. If the Republican offers a conventional economic agenda with minimal taxes and regulations, stocks may stay hot. Otherwise, the SkyBridge Capital founder says to look out below.
"People are not going to be ready for that," Scaramucci said of that latter outcome. "They will not be ready for that, and so the stock market will have gotten wrong the current movement."
Though risks loom, investors should stay the course
Despite his worries, Scaramucci doesn't think that a market crash is the most likely outcome.
"My guess is that the stock market aficionados, the stock market experts, are probably right," Scaramucci said.
Trump's team — of which Scaramucci was a member seven years ago — will be a "guardrail" for the president-elect, including campaign co-chair and incoming chief of staff Susie Wiles, he said. His hope is that the incoming president will take a softer stance on deportation and tariffs.
So while Scaramucci said doomsday is possible, the fact that it's not his base case means that he, too, isn't taking all of Trump's rhetoric literally. When pressed on this point, he agreed.
"Yeah, I think that's a fair assessment," Scaramucci said. "I just think that there's some danger here."
Regardless of one's feelings on Trump, history says that it's far more risky to leave the market than to try and get out ahead of a crash that may never come.
US stocks tend to finish the year on a high note, no matter who's in office, and strategists at several major investment firms are calling for a continued rally in 2025.