Moreno's Stance on EVs Challenges the Status Quo
Positioning as an Automotive Voice
Moreno, with his background in the automotive industry, is determined to have a say in shaping the future of the sector. He believes that the Senate should play a crucial role in guiding automotive policies. "We have the opportunity to make a real impact on the automotive industry," he said. "Our decisions will shape the kind of cars that Americans drive and the future of the manufacturing sector."After emerging victorious in Ohio, Moreno sees his role as a leader who can bring about positive change. He is committed to working with his colleagues to ensure that automotive policies are in the best interest of the country. "We need to look at the long-term implications of our decisions," he added. "It's not just about today; it's about the future of our children and grandchildren."
Criticism of the Federal EV Tax Credit
At the 2024 CNBC CFO Council Summit in Washington, D.C., Moreno made his stance on the federal EV tax credit clear. He called it "catastrophically stupid" and argued that it unfairly distorts the market. "The tax credit is a double-edged sword," he said. "It may seem like a good idea in theory, but in practice, it creates more problems than it solves."Moreno dismissed claims that the incentive helps U.S. automakers compete with Chinese EV manufacturers, labeling the argument as "nonsense." He believes that the market should determine which cars are popular, not government subsidies. "If a car is good, people will buy it," he said. "We shouldn't be picking winners and losers in the automotive industry."
Shifting Industry Dynamics
Major automakers are currently recalibrating their EV strategies as consumer demand for EVs has shown signs of cooling. Once seen as the industry's future, EVs are now facing challenges. Manufacturers like Ford, General Motors, Mercedes-Benz, and Volkswagen have announced delays or scale-backs in their EV rollouts."What we saw in '21 and '22 was a temporary market spike," said Marin Gjaja, COO of Ford's EV division. "The market is now adjusting to more realistic expectations. We need to be flexible and adapt to these changes."
Automakers are shifting their focus towards diversified lineups, including hybrids, to meet the changing needs of consumers. This shift reflects a growing recognition that not all consumers are ready to make the switch to electric vehicles just yet. "We need to offer a variety of options to give consumers the choice they deserve," said Gjaja.
Marketplace Over Mandates
Moreno advocates for reducing government intervention in the automotive market. He believes that a favorable business environment can be created through good taxes, regulations, and skilled workers. "The marketplace should be allowed to operate freely without unnecessary government interference," he said.He also criticized how the EV credit excludes commercial vehicles and comes with MSRP restrictions, arguing that it disproportionately benefits wealthier consumers. "We need to ensure that our policies are fair and equitable," he added. "Everyone should have access to the benefits of clean energy, not just the wealthy."
A Broader Policy Shift
Moreno's stance aligns with that of other Republican leaders, such as Vivek Ramaswamy, who co-leads President-elect Trump's Department of Government Efficiency (DOGE). Ramaswamy has announced plans to review government spending related to electric vehicles, including a loan commitment from the Department of Energy to Rivian Automotive.This growing skepticism around EV incentives signals a broader industry pivot. While EV sales are still expected to grow, the market is recalibrating to reflect consumer preferences for mixed powertrain options. Moreno's push to eliminate the EV tax credit highlights the ideological divide about the role of government in shaping automotive innovation and market trends.
"We need to find a balance between promoting clean energy and respecting the free market," said Moreno. "Our policies should encourage innovation while also considering the needs of all Americans."
Navigating the Delicate Balance of Holiday Season Bull Markets
Distinguishing Between Rational and Risky Bull Markets
Is it possible to be too merry and bright heading into the holiday season? The question is timely, given the unmistakable upwelling of investor enthusiasm toward equities in recent weeks and a reignited impulse by traders to grab for the raciest assets. The trick, though, comes in trying to distinguish between a bull market feeding off rational fundamental positives and one that has grown so frisky as to be acutely risky. It’s not clear that line has been crossed, though it might not be too far away at this rate.
What’s clear for sure is that we’ve entered the “belief” phase of this bull market, which is more than two years old yet is showing few of the telltale signs of ending very soon. The reason to favor stocks now is not because they are inexpensive, or underappreciated, or because there is a high wall of worry or deep reservoir of doubt about the economic underpinnings, but because we are somewhere in the middle stages of an economic expansion and technological investment boom that looks set to continue for a while.
Brokerage-House Strategists' Outlook
Brokerage-house strategists as a group were far too cautious entering 2023, the S & P 500 staying ahead of the consensus target virtually all year. They appear unwilling to be caught behind again, with near-universal calls for a winning 2025 with projections clustering around 6500 to 7000, or up 7% to 15% from here. For all the perceived symmetry between the market response to the elections of Donald Trump in 2016 and 2024, the Street’s outlook now is starkly different.
In December 2016 after the initial post-election rally, strategists foresaw just 5% upside for 2017, the lowest projected return since 2005, citing “stretched valuations and the unknowns about Donald Trump’s first year as president,” according to a Wall Street Journal article at the time. As it happened, of course, 2017 was one of the highest-reward/lowest-risk years for a buy-and-hold investor, the S & P 500 scaling that wall of worry to a 20% gain without as much as a 5% pullback along the way.
Signs of Froth in the Market
Some froth is observably building, such as in the high-velocity trading indicators. The demand of downside index protection through puts is near historic lows versus the calls that grant upside exposure, known as the skew. The ratio of puts to call options traded has been running at levels generally seen as stretched to the downside (implying excess bullishness), though technician Stephen Suttmeier of Bank of America last week pointed out we remain shy of the deep extremes that were sustained during the 2021 tech-and-meme-stock mania.
Bitcoin running to $100,000 has excited an entire cohort of ride-along crypto plays. Never overlook the fact that MicroStrategy is continually issuing billions worth of zero-interest convertible securities to buy more Bitcoin. Those converts are a way for the company to get paid for the volatility of its stock by hedge funds, who use arbitrage strategies to play the embedded options in the convertibles. And on top of all that, leveraged ETFs on MicroStrategy stock itself then have to hedge around the daily price moves.
Market Rotation and Investor Sentiment
For all the scolding and raising of yellow flags by investors made apprehensive by this rush for low-quality merchandise, it’s not clear that this is anything but a bull market doing bull-market things, with episodic overshoots and stampedes. One thing bull markets do, eventually, is to punish “prudence,” as defined by risk-averse participants. The wild speculative precincts of the market could even reflect a revving of animal spirits that could become a broader upward acceleration – which might then turn into a climactic short-term top.
Most investor surveys, positioning gauges and even margin-debt levels remain shy of outright warning signals. I’ll point out again, as I did here two weeks ago, that most of this action is pretty well contained to certain corners of the market, where the high-turnover “story stocks” (electric helicopters? Quantum computing?), leveraged crypto vehicles and Trump-adjacent tickers (Palantir, Tesla) are ripping and swooning, to little noticeable impact on the core large-cap indexes. Last week is a good example of the clockwork rotational action in the bulk of the market.
The Market's Own Best Advocate
Leuthold Group maintains a Major Trend Indicator that combines four principal market drivers. The valuation, sentiment and cyclical metrics have largely been unfavorable for many months. Yet the technical gauge has consistently flashed bright green. In the latest reading from early last week, the dozen market-based trend indicators were all at a “perfect score” for the first time, covering the major indexes, market breadth, bellwether sectors as well as super-cap growth stocks. An interesting reading for those who believe one should spend more time listening to the market than shouting about how it might be wrong.
None of this changes that 22.5-times forward earnings is a steep price of entry for the S & P 500 (even if valuation tends not to compress with earnings rising and the Fed getting easier). For now, investors can assume whatever they choose about the details and impact of policy under Trump 2.0, and on balance they seem to be more willing to price in incremental benefits than costs. Note, too, that the 6100-ish level (just above Friday’s close) has also been a longstanding upside target based on some trend work that places it at the top end of the index’s long upward path.
Bottom line: Don’t be surprised if some excuse for a stiff gut check comes around before terribly long. But don’t try to be a hero betting aggressively that the happy herd will suffer a comeuppance soon.