Derp

hardhat

I often wonder how many misguided Trumpistas actually pulled out of the stock market on November 4, the day after Biden was elected president. During the campaign Trump famously said the stock market would crash if Biden won, which probably sounded like a call to action to at least some of The Donald’s disappointed devotees, who must have called their brokers and put in panic orders to sell, sell, sell. After all, Trump predicted a market rout if Biden won the election, and who were they to doubt the wisdom of their political and financial guru?

Trump, of course, couldn’t have been more off base. His followers are probably still trying to figure out how their man could have been be so wrong.

If you’re among that lot, I don’t have much sympathy for you. My decades-long experience as a floor trader (like those depicted above in Forbes) and public broker taught me a lesson that really amounts to one of the foundational axioms of securities investing: markets are apolitical.

If you had, indeed, been gripped by political panic and sold stocks in fear of Biden’s effect on the market, you just missed out on an 18% upside move in the Dow Jones Industrial Average. We can argue until our faces are blue over whether the market is over-, under-, or fairly-valued, but there’s a fact that is indisputable, the stock market has just had one of the handsomest short-term rallies in history. If you sold out because Biden won, you were wrong, wrong, wrong.

Stocks don’t care about who is in the White House. Stocks care about corporate earnings and prospects for future business. As Biden’s presidential plans began to coalesce during the months before his inauguration and have since congealed in the form of his relief package, stock traders know one thing: there is about to be a surge of liquidity in this economy. All the pent-up frustrations created by the pandemic are about to be unleashed in what seems likely to be a burst of spending and general economic activity.

The Conference Board just upgraded its forecast for real (inflation-adjusted) U.S. economic growth in 2021 from 4.4% to 5.1%. We haven’t seen a number that high since 1984. Indeed, since 2010 we’ve been stuck in a 1%-3% growth range. Granted, we lost ground in 2020 due to the pandemic and some of the Conference Board’s projected growth forecast amounts to getting us back to where we’ve been. Just the same, growth is growth, no matter the baseline, and it will no doubt be reflected in much-improved corporate earnings, which is basically what stocks are anticipating.

As to Trump and his hopeless prediction, it was based on the assumption that Biden would raise taxes, causing the market to crash. That, historically, is a baseless claim. Back in the early ‘90s, Bill Clinton put in one of the largest tax increases in history, and the stock market soared during the rest of the decade. The Dow traded at around 3,000 in 1990 and more than tripled to over 11,000 by mid-2000. For context, a similar move would take the DJIA to around 100,000 by 2030 if the markets were to stage a repeat performance. Those of you who bragged about how well your 401(k)s did under Trump should take note. It doesn’t necessarily follow that a tax increase leads to a drop in stock prices.

There are more credible economic arguments to be made against the size of Biden’s relief package, for the most part based on its potential for adding on to an already sizable federal budget deficit. Those critiques are focused on how Biden’s package might spark inflation, raise interest rates and stifle growth. Even some notably liberal economists, like Larry Summers, Treasury Secretary in the Clinton Administration, are concerned about the risk.

But, in addition to the traders in the stock market who bet real money on the outcomes they anticipate, analysts at Bloomberg, Business Insider, Financial Times and others believe the inflation risk is exaggerated. Recent history has seen the deficit expand dramatically without creating inflationary pressures, an outcome consistent with the growing acceptance and application of “modern monetary theory,” which generally holds that governments can sustain high levels of debt without cause for concern.

This theory may seem like heresy to those of my generation who were trained to loathe excessive government deficits, but during the past decade or so, MMT proponents seem to be getting it right. Given the overall state of our stagnant, pandemic-hobbled economy, there’s more to risk by the government not spending aggressively than by spending too much. As your stimulus payments start hitting your bank accounts, consider the boost your communities will be getting as you and your neighbors start putting that money into circulation.

As to the stock market, I mentioned one axiom early in this piece, which makes me recall another one. History has proven it to be resoundingly true - and it should be at the top of every investor’s mind: Don’t bet against America. Over the long haul, naysayers like Trump have been proven wrong, time and time again.

John Tsitrian is a businessman and writer from the Black Hills. He was a weekly columnist for the Rapid City Journal for twenty years. His articles and commentary have also appeared in The Los Angeles Times, The Denver Post and The Omaha World-Herald. Tsitrian served in the Marines for three years (1966-69), including a thirteen month tour of duty as a radioman in Vietnam.

https://www.sdstandardnow.com/home/remember-when-trump-said-the-market-will-crash-like-youve-never-seen-before-if-joe-biden-goes-to-the-white-house

46XiJCAB

Just didn't give Joey enough tim to prove Trump right.

MikeDamone

MMT. 😂 JFC

AOC and TKS still believe!