Wall Street commentary this election year, at least for now, has a distinct air of Soviet-style disinformation. The elephant in the room is airbrushed out of the picture.
The fading pachyderm in this metaphor is the question of what Donald Trump will do to American democracy if he becomes president again. It is now clear to everyone that he wants to rule as a fascist. But if you’re a Wall Street strategist, you can’t mention his, uh, authoritarian tendencies, his attempted coups, his indictments, his encouragement of violence. It’s best not to go there because so many very wealthy clients or potential clients support Trump. If you do that, your boss will fire you.
So no one says anything. The silence is deafening. Strategists are happy to discuss Trump’s impact on trade and taxes, but not his potential impact on democracy. The headline for Schwab’s strategy article in March was “Don’t bet your portfolio on election year fear.” Oh, I feel better now. As Liz Cheney puts it, this is all another sign that we may be “sleepwalking into a dictatorship.”
I know: There’s more than a little obscenity in the descriptions of how Trump’s possible election victory would affect the world. stock market. There are more important things at stake here.
Still, money is important. If Trump wins and people manage their money better after that disaster, there will be even more money left to fund the resistance movement. I developed a strategy. Anticipating the possibility that the stock market would fall by his 50%, he has been selling his 1% of his stock holdings each week. Currently, I have 21% cash, but if the election remains close, I plan to have 50% cash by Election Day. (All of my sales are in a retirement account and I earn 5% while I wait.)
Why should you care what I do? I worked as a money manager to beat the market for her 15 years. Since retiring nine years ago, I have continued to beat the market. But what I can’t do is predict the economy or time the stock market. No one can do that.
I mean, I’m kind of an expert here. However, I disagree, as there is no historical record to analyze how American capitalism functions under authoritarian rule. Still, there are some speculations.
I try not to base investment decisions on political passions. Historically, that’s a terrible idea. The stock market has performed much better under Democratic presidents (even if you remove Herbert Hoover), but it has also performed well under some Republican presidents like Dwight Eisenhower, Ronald Reagan, and yes, Trump. I showed you. No matter who is in charge, the market will rise over time.
My economic concerns about fascism are both general and specific. I believe that the distortion and destruction of the system (the fictional but actual “weaponization” of the Justice Department, the removal or destruction of the FBI and other key government agencies) has startled and awakened domestic and foreign investors who had been asleep. I’m worried I’ll startle them. Reallocating assets to cheaper and perhaps safer global markets. Imagine if the Trump administration, irritated by major corporations’ lack of loyalty to its leaders, enacted policies that cut corporate profits. The company’s stock price will plummet, and investor confidence will plummet.
I am concerned that the distortion and destruction of institutions and key government institutions will startle and awaken dormant domestic and foreign investors, forcing them to reallocate their assets to cheaper and safer global markets. .
Trump then targets another company, and then another, as Trump is known for his penchant for retaliation. It’s easy to imagine him behaving like Chinese President Xi Jinping, wasting stock value on companies he doesn’t like. (Mr. Xi single-handedly made China’s stock market a global pariah, causing it to decline 50% since May 2015, during which time it ranks as one of the worst-performing markets on the planet.) Perhaps some of foreign companies will complain about the increase in import prices. They will be targeted as well. We may see “Night of the Long Knives” in corporate style in the near future.
Industrial policy ranges from the vindictive to the capricious to the corrupt. Some companies run advertising campaigns on Truth Social to break out of the corporate doghouse. That’s great for President Trump’s bottom line, but not so much for America.
Around the world, appalled observers may be reconsidering their next U.S. investment plans. How can we be sure it will work? What unforeseen costs might be incurred? What if the American president also makes an enemy of them?
President Trump’s dire trade policy pronouncements (the impact of over 60% tariffs on Chinese goods could have disastrous effects on inflation and the global economy, and global trade wars tend not to reassure investors) (Yes) and President Trump’s general lack thereof will be omitted. Well, ability in any field. Indeed, his desire to further reduce corporate taxes from 21% to 15% is likely to give markets a temporary boost, even as the deficit swells.
Capital outflows from U.S. stocks and a slowdown in direct investment into the U.S. economy could keep the stock market depressed for years after President Trump leaves office. if That is, he leaves the office.
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Okay, but why not wait until after the election to start selling stocks? Because there will be surprises. With a hung jury in the New York hush money case, it became clear that Jack Smith didn’t have enough time to file federal charges on January 6, let alone file a Mar-a-Lago documents lawsuit. What would happen if What if Joe Biden had serious health problems? What if the economy takes a downturn before November?All of this would be bullish for Trump, but what if investors decide so despite the strategists’ silence? it’s not Aren’t they really optimistic about the chances of a second Trump administration?
Of course, Trump might win the election and things would work out anyway. (They were like that last time, if not for humanity, then at least for the stock market.) The war against democracy he hoped for might fizzle out. Then you can immediately put your cash back into the market. However, please note that he has one important point. Prudent people who could have warned about future risks had strong financial incentives not to do so.
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Republicans, Democrats, and the economy
