The Elections and Wall Street: Who Wins in November
“Don’t always trust the experts.” — Steve Forbes
On Tuesday, Aug. 23, at the San Francisco MoneyShow, we had a raucous debate on “The Elections and Your Portfolio.” I was the moderator and had the challenge of confronting four Donald Trump supporters in front of an audience of both supporters and detractors.
Some of the Democrats in the audience yelled out, “Stop talking about politics. Give us investment advice we can use!”
The four Trump supporters were: Art Laffer, the father of supply-side economics and inventor of the famous Laffer curve (showing that sometimes if taxes are cut, revenues can go up); Steve Moore, Trump’s chief economic advisor and former member of the editorial board of the Wall Street Journal; George Gilder, a technology expert, author and Reagan advisor; and Wayne Allyn Root, the “capitalist evangelist” and professional sports handicapper from Las Vegas.
Dr. Mark Skousen moderates a debate at the San Francisco MoneyShow featuring Wayne Allyn Root, George Gilder, Steve Moore and Art Laffer.
I played the devil’s advocate and challenged them on three “inconvenient” facts.
First, the stock market tends to do much better when Democrats are in office. Laffer denied it, responding that there are many other factors that cause stocks to rise and fall, including Fed policy.
Second, in 19 of the past 22 elections, if the stock market is up in the three months before the November elections, the incumbent party wins. This is good news for the Democrats and Hillary Clinton. Job creation has been particularly strong this year, which is positive for Obama and Clinton. While the U.S. economy is weak, as demonstrated by anemic Gross Output (GO) and Gross Domestic Product (GDP) numbers this year, it hasn’t been a “disaster” as Donald Trump and his followers have claimed.
In response, they said that the stock market was being artificially stimulated by easy-money policies and did not reflect the reality of a slumping economy and poor jobs, which would cause voters to support Trump and allow him to win in November. Wayne Root said that the economy has been a “disaster,” and the middle class is still suffering badly.
Moore and Laffer outlined Trump’s proposals to cut taxes and regulations (repeal Obamacare), which would get the economy back on track. They also hoped to temper Trump’s anti-trade and anti-immigration sentiment (as economists, they know that trade agreements and liberal immigration policies are positive).
But they acknowledged that the election will be close. When I asked them to bet $1,000 that Trump would win, all except Root declined.
Laffer noted that in 1980, Ronald Reagan was viewed as a lightweight and behind in the polls, but ended up winning in a landslide over Jimmy Carter.
In response, I noted that 1980 is not the same as 2016. Back then, we were in a deep recession with double-digit percentage unemployment and spiking interest rates. Perhaps the only similarity between the two is that both support supply-side taxes.
I told the audience, “I knew Reagan, and Trump is no Reagan.” That got huge applause from the audience.
Third, I brought up one note of caution: No matter who wins the election in November, stocks tend to do poorly in the first year of a new president. According to Ned Davis Research, the S&P 500 posts its weakest returns in the first year of the four-year election cycle. Since 1900, stocks have gained just 3.4% on average in the post-election year, compared with gains of 4.0% in the midterm year, 11.3% in the pre-election year and 9.5% in an election year.
After a seven-year bull market, 2017 may witness a significant correction on Wall Street.
‘Investing in Art & Rare Tangible Assets Seminar,’ New York, New York, October 24-25: The Oxford Club, led by investment writer extraordinaire Alex Green, will be hosting a special two-day seminar on investing in art and collectibles. I’ve just been added to the program to speak on “Investing in Rare Financial Books for Fun and Profit.” I’ve been a collector of rare financial books for years, and have profited handsomely. (I’ll also reveal my secret way to save 20-30% off all artwork and collectibles.) Other speakers include Geoff Anandappa and Richard Gladdle of Stanley Gibbons on rare coins and stamps… James Forsyth on investing in wine… and Marsha Malinowski and Clive Moss on investing in fine books and manuscripts. The seminar will include a private tour of the Metropolitan Museum of Art by its President Daniel Weiss, and a visit to Sotheby’s. What fun! For more information, please click here or contact Oxford Voyager Club Concierge Kiara Laughran by phone at 443.708.9411 or by email at [email protected]. She will be happy to help you. Be sure to mention you are a subscriber to Forecasts & Strategies.
Finally, Kim Githler, the producer of the MoneyShow conferences, is a libertarian and a big supporter of FreedomFest. She plans to attend next year’s big 10th anniversary show, July 19-22, 2017, at the Paris Resort in Vegas. We soon will announce our incredible list of keynote speakers for next year’s 10th anniversary celebration of FreedomFest. See you there!
In case you missed it, check out my e-letter column from last week about the possible gradual death of the U.S. market. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.
You Blew It!
Six Shooter: NBC Olympics Ignores First Person to Win Six Consecutive Olympics Due to Her Politics
I watched much of the Olympics on NBC channels, but missed any reporting on American shooter Kim Rhode, who made history by becoming the first Summer Olympian to win six consecutive individual medals. She won a bronze in skeet shooting at this year’s Olympics. Rhode also is the first-ever Olympian to medal on five different continents.
NBC is famous for ignoring or downplaying many non-traditional events in the Olympics. While they spend hours airing basketball, swimming and gymnastics, they show little of track & field events such as the high jump, long jump and vole vaulting, or specialty events like archery and shooting.
Could it be because she is a big fan of the Second Amendment and a supporter of Donald Trump?