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OK, right off the bat, this post will have a crap-ton of politics. It’s about the effects of the election on the market and my (and presumably other) portfolios. I put it here because “US Policy” is more for cafeteria food fights, and the Fool, bless their heart, doesn’t want any politics on the Macro board. (I understand why, I just find it unnecessarily restrictive. I will put a link on the Fool Macro to direct those interested to come browse over here; perhaps a couple of new faces will.)

OK, so the election is less than a week away. The pollsters are saying it’s too close to call, nd every encouraging sign for one candidate is contraindicated by another. But my analysis on one side is pretty simple: the economy is killing it right now, and if Kamala is elected I see little to change that in the short run or even medium term. You can never tell, of course; Russia gets crazy, China takes Taiwan, a major bank goes toes up, whatever, but overall, same same same.)

If Trump gets the nod I expect the market (overall) to get a pop. It did well during his last term, and with the flush of “fewer regulations” and all that on first blast I’d expect more.

That said, Musk is talking about “cutting 30% from the budget”. That’s a pipe dream, obviously, you can’t do that without cutting social security and Medicare and halving the military - none of which is likely to happen. I expect a lot of stürm und drang over it, lots of huzzahs and hosannas, and at the end Trump will decide not to rock the boat because he doesn’t care about the deficit, really. (Neither do Republicans, except when Democrats are in office.)

If, however, he does let Elon loose, then I would expect a violent reaction - in slow motion for the economy, faster for the markets. Even Musk says there would be pain for two years, and then it would be swell. Two years in politics is forever, so I doubt it would be allowed to continue that long.

Likewise with Trump’s often touted tariffs plan. Putting a national sales tax on everything imported (which face it, is most everything people buy) will kill the economy short term. Probably long term too, although I doubt that even with a compliant Congress it would pass. Then again, I’ve been wrong before. A lot, actually.

And let’s not get into what might happen with the Pharma sector if RFK is actually given any power over the medical community in this country. Do I think a lot of shifty stuff might get through? Yes. Do I think vaccines would get any priority? I do not. (Those are supposedly not a big money maker for the manufacturers; I don’t know enough about it to comment.)

I could go on, but you get the drift. Short term, probably not a lot of gigantic change with either candidate. Longer term, probably massive if Trump is elected. Then again, I remember “infrastructure week” as a running joke for nearly 4 years, so all the hyperbolic talk might come to nothing, we’d just have to endure the unendurable for 1400-some-odd days.

As for specific companies and industries, well I’d look to “news”, “late night talk shows”, Amazon, Google, and others to be in the center of the target, and Tesla to walk off with some sort of wonderful prize for the boy genius’ efforts. There are others, maybe they’ll come up later in the thread.

If you’d like to contribute to this thread, please do, just keep it somewhat civil and focus on the market and the economy rather than the outrage-of-the-day, an easy trap to fall into. I’ve done it myself, eh?

I could go on, but you get the drift. Short term, probably not a lot of gigantic change with either candidate. Longer term, probably massive if Trump is elected. Then again, I remember “infrastructure week” as a running joke for nearly 4 years, so all the hyperbolic talk might come to nothing, we’d just have to endure the unendurable for 1400-some-odd days.

I think that there won't be a lot of gigantic change with either candidate on most economic regulatory and federal budget matters....either long or short term. The President just doesn't control that much.

Take, for example, the idea of cutting the budget by 30%. That can't happen no matter what the Executive wants. Total non-defense, non-discretionary spending is only about 14% of the budget. Even if Trump tries to fiddle around with impoundment, he's not going to do it for defense and he can't do it for the non-discretionary stuff (like paying social security or interest on the debt). And Trump probably doesn't want to cut spending for budgetary reasons - he might want to cut very specific programs in order to get a political effect, but he's not a "let's cut spending" politician.

Even if he did, he needs Congressional approval. He'll never get it. Regardless of whether the Democrats get the House or not, the GOP is unlikely to get enough of a majority to make things like entitlement reform possible. He could probably get some of his tax cuts through a reconciliation bill, but nothing "gigantic" in terms of effect on the economy. He has more unilateral control over tariffs, but since goods imports are only about 11% of GDP, and since Trump isn't going to want to suffer the inflation/economic pain that comes with increasing import duties on things like oil and manufacturing equipment by a large number, he's going to probably just target stuff.

As for specific companies and industries, well I’d look to “news”, “late night talk shows”, Amazon, Google, and others to be in the center of the target, and Tesla to walk off with some sort of wonderful prize for the boy genius’ efforts. There are others, maybe they’ll come up later in the thread.

Trump's not famous for rewarding the people who help him, so I don't know if Tesla gets a wonderful prize or not. But I think Musk would be happy if he just got a compliant NHTSA to let him operate FSD/driverless cars. Probably the one existential piece of regulatory risk Tesla faces is a determination that driverless cars have to have redundant sensing - that they need both vision and LIDAR/radar. If there's a rational business explanation for Musk's turn towards Trump - rather than milquetoast supporting both sides since he wants to do business with the government no matter who wins - it would be that.

have to endure the unendurable

The only other time I've seen this phrase was in association with complete, unconditional surrender by a destroyed nation: https://en.wikipedia.org/wiki/Hirohito_surrender_b....

Not gonna.

Patience, yes, Surrender, nope.

- sutton
remembers what it was like to spend four years aghast. Hadn't really thought it possible until then.

Something unexpected will happen. Always does. The Federal Deficit could be the black swan. The deficit became much larger with the 2008 Great Financial Crisis and the 2020 Covid Pandemic. Another crisis badly handed could push the debt over the tipping point. There's a limit to how much the Federal Government can borrow, we just don't know what it is yet.

Federal Deficit as Percent of Gross Domestic Product
https://fred.stlouisfed.org/graph/?g=1xKUk

Anyone can captain the ship when seas are calm, but who can keep us afloat through a hurricane? Or maybe just avoid the storm with some forethought.

Thanks for creating this topic. It has been on my mind for a while.

In 2016, I made a decision to ride out the storm, having faith that the guardrails we have in place would temper the mercurial behavior of Trump.

In 2024, I am less sanguine. Trump has learned to put sycophants in place in key positions. And, most frightening, it appears he has a compliant Supreme Court that appears too comfortable changing norms and creating new rules out of thin air, notwithstanding claiming to be Constitutional textualists.

And there is Trump’s faltering mental and physical health, retribution to who knows who, and the wildest of wild cards waiting in the wings, JD Vance.

And, as mentioned above, some crisis will raise its head. It always does. I don’t think these folks are the best and brightest nor do they seem inclined to listen to opposing views or, heaven forbid, experts.

The issue I’m wrestling with is, what are my options to protect my wealth? I just don’t see any.

Invest overseas? If the US sneezes the rest of the world catches a cold.

Cash? That could be devalued like equities.

Real estate? Not something I know a lot about.

Bonds? Meh.

Rare coins? Possibly (lifelong numismatist here) but that’s a huge gamble. Plus, like gold, where do you store it and it’s not very liquid.

I’m curious if others have ideas about preserving wealth when chaos strikes.

Musk is predicting a severe Bear market. I predict Trump will fire Musk in less than 6 months. Trump prefers to screw things up on his own (like the Covid response and press conferences). I'm guessing Musk is referring to the Federal debt being on "sounder footing", and this leading to a "healthier, sustainable economy".

Elon Musk assures voters that Trump’s victory would deliver “temporary hardship”, November 1, 2024
"an anonymous user posted Tuesday that, “If Trump succeeds in forcing through mass deportations, combined with Elon hacking away at the government, firing people and reducing the deficit - there will be an initial severe overreaction in the economy…Market will tumble. But when the storm passes and everyone realizes we are on sounder footing, there will be a rapid recovery to a healthier, sustainable economy.” Musk replied, “Sounds about right.”"
https://www.vox.com/politics/381637/elon-musk-dona...

But when the storm passes and everyone realizes we are on sounder footing, there will be a rapid recovery to a healthier, sustainable economy.” Musk replied, “Sounds about right.”"

I think that’s what Hoover said right before the Great Depression.

Great topic.

Tax cuts are a given under Trump. They will flow mostly to the top. The deficit
will of course rise because of them. Tariffs are a potential disaster, if implemented
in the way that Trump speaks of them. Other nations will retaliate with their own
tariffs. This does not sound good for domestic, or world, stock markets.

Mass deportations would be highly inflationary. I have seen very, very few white
people working the fields, so deportations will lead to higher food prices, don't
see any other possible outcome there. I do not see Americans lining up to
take those jobs, and unemployment is already low, so where will these replacement
workers come from ???

Rising inflation will put pressure on the Fed to raise rates, which is total
opposite of what Trump wants.

Taking a "blowtorch" to the ACA has to have some kind of negative feedback to the economy.
That has to lead to higher insurance premiums, so people will yet again have fewer
discretionary dollars to spend.

I'm trying to think of positives that come from a Trump Presidency, but drawing a blank.
He will try to eliminate as many regulations as possible. Personally, I very much enjoy
clean air and clean water, as well as child-labor laws, and employee-workplace protections.

Perhaps the stock market gets goosed up, as I can remember times when Wall St rose when
the working class suffered ( think bank bailouts,lol ), but over longer period valuation
is supposed to be based on ever rising free cash flow. They can goose that by doing share
buybacks, but not if revenue dries up.

I'll check back on this thread, really want to see some details of how a Trump term
will benefit the Country. With my personal bias, I sure don't see it, but I've been
wrong before,lol.

Expect more in a second Trump term. Trump now knows how to get his agenda done. In 2016, Trump planned on 2 million deportations. This time, with the newly discovered Alien Enemies Act of 1798, Trump is planning on 15 million deportations.

Trump also has a plan to defund through impoundment. This gives Trump leverage over many companies that either want less regulation, more subsidies, or more government contracts. Musk has said $2 Trillion in cuts out of the $6.9T budget. Musk will deregulate by firing all the regulators, starting with the S.E.C. staff that has pestered him for years, just like Twitter. Everyone gets a flame thrower, more pollution, snake oil, and fewer meat inspections. 2024 Outlays:

$2.8T will be cut to $0.8T in:
Medicaid $750 billion
Other mandatory $1096 billion
Nondefense discretionary $948 billion

categories not cut:
Social Security $1452 billion
Medicare $903 billion
Defense $849 billion
Net interest $892 billion

These are significant changes to the $29T U.S. economy. I suppose the fired government employees can take the construction jobs the deported people held. Trump will make backroom deals with individual companies that want to avoid the chaos (like Apple asking for special tariff treatment). Healthcare will suffer from the Medicaid cuts and Obamacare defunding. Startups will decline because of less research. Homebuilders won't have enough workers. Mainstreet will be neglected, with less investment. Companies with Washington contacts will do well, with special bespoke deals. Oil producers will benefit from fewer regulations, but won't like the 50% lower prices. Let the kleptocracy begin.

=== links ===
Trump says he’ll undertake the ‘largest deportation’ in U.S. history. Can he do that?, Oct. 24, 2024
"In May, Trump told Time magazine he would target 15 million to 20 million people who he said are living illegally in the U.S. The nonpartisan Pew Research Center estimates the actual number to be about 11 million as of 2022. More than 2 million people have entered the country illegally since then. “Let’s start with 1 million,” Vance told ABC News in August. During his entire presidency, from January 2017 to January 2021, Trump deported about 1.5 million immigrants, according to a Migration Policy Institute analysis of federal figures — far fewer than the 2 million to 3 million he speculated about deporting in a 2016 interview as president-elect. The Biden administration is on pace to match Trump’s deportation numbers."
https://www.latimes.com/politics/story/2024-10-24/...

"On Day One, President Trump will direct federal agencies to identify portions of their budgets where massive savings are possible through the Impoundment Power, while maintaining the same level of funding for defense, Social Security, and Medicare."
https://www.donaldjtrump.com/agenda47/agenda47-usi...

An Update to the Budget and Economic Outlook: 2024 to 2034
https://www.cbo.gov/publication/60419

I think that there won't be a lot of gigantic change with either candidate on most economic regulatory and federal budget matters....either long or short term. The President just doesn't control that much.

On this we disagree. Using the various tools which the Right Wing think tanks have examined and identified, there is much damage that can be done, and with a compliant Supreme Court it is unlikely that the “checks and balances” will play any part.

Last Trump term we saw Pentagon monies funneled into building the wall even after Congress refused to appropriate additional funds for it. The USSC? “It’s OK.”

I have a two relatives who work for regulatory offices in the Federal Government. One retired because of the unrelenting pressure from above, a syncophant installed as head of the agency who decided “everything would be done differently now”. She was replaced by, you should not be surprised, another acolyte who did as she was told.

The other is lower level, in the FDA, and she says she was not unscarred, as pressure to approve drugs faster with less testing and fewer resources was strong indeed. Expect more of the same.

Yes, those are only two small examples, but Irecall that in the first administration they were wholly unprepared to win, and now they’ve had eight years to put the mechanisms in place and consider how to best leverage their advantage. Again, forget the C&B of the USSC, only the legislature stands in the way, and depending how the votes tally out that might not be much of a firewall.

I’m generally in favor of policies I don’t like, so long as the population has voted for them and they don’t violate the Constitution and so on. I will complain, of course, if they gut the ACA, I’m exceptionally unhappy with the out-of-thin-air restrictions on abortion (admittedly that’s how it came to be the other way too, so…) and so on. But I see a strongman without illusion or consideration of anything else - it’s a “my way at any cost” mentality which I don’t believe I’ve seen before in my lifetime. Even Nixon, as underhanded a thug as he was, didn’t take it this far.

The President controls a lot, most of them just haven’t had the gall to ignore the provisions set in the founding documents, or try to reverse long standing policies on a whim. That is not true, at least not with this candidate, nor with his supporters in Congress.

Neither party is doing anything to reduce the deficit. Many/most of Trump's plans will be very inflationary. Tariffs, deportations (who is going to do the work of those people for that low pay? Not Americans living in the US), tax cuts that are very generous for the wealthy ($300K and up and up, gets more generous over $1M) but not most "normal" families. I'm using in the middle on many things. Some one way and some the other way but there isn't anything positive with Trump's agenda unless you have millions in the bank.

Both parties talk about reducing inflation but spending more, tariffs, higher pay, don't reduce inflation. Higher interest rates and less money in society reduces inflation. What are they going to do, reduce everyone's pay by 20% and then try to force companies to cut prices by x%? Doesn't work, especially with many things imported. And hard to increase or "bring back manufacturing" when you can't be cost competitive.

Just a colossal mess.

Yes, those are only two small examples, but Irecall that in the first administration they were wholly unprepared to win, and now they’ve had eight years to put the mechanisms in place and consider how to best leverage their advantage. Again, forget the C&B of the USSC, only the legislature stands in the way, and depending how the votes tally out that might not be much of a firewall.

Yes - but I thought we were talking about the macroeconomy.

Sure, Trump can have a big impact on how the federal government does things. But remember, the federal government is largely an insurance company with an army. Social security, Medicare, defense, and servicing the national debt. To a first order of approximation, that's the U.S. government. The rest of it - the stuff that Trump can or will actually mess with - is a rounding error relative to the size of the economy.

The only real levers he has to pull on that could affect the economy are international trade and foreign policy. Unlike most domestic economic matters, where most of the field has been occupied by Congressional legislation, the President has a lot of control over tariffs and trade. A lot of the authority to set tariffs has been delegated to the Executive, and his role in negotiating treaty - subject to review by the Senate and not the House - gives him some additional flexibility. And of course, exercising foreign policy can have a macro effect on the economy, especially when it comes to China and the Middle East.

But for the most part, the federal government is only one of many factors that affect the macroeconomy, and the policy choices of the President are themselves only a small part of the federal government. Regardless of his wishes, and no matter how cooperative SCOTUS might be, it's also hard to do anything quickly in the federal government - the APA makes mockery of all Presidential efforts, large or small, to change the direction of the bureaucratic leviathan. And Trump turns into a lame duck the moment he takes the oath, and especially so once the midterms happen - and agencies will still pay very close attention to what the chairs of their appropriating committees think and want, since they may long outlast Trump.

So while Trump may wreak havoc within the Executive, his impact on the broader economy will be much more limited. As will Harris', for good or ill. The President is important, but not that important a determinant of how things go.

Take, for example, the idea of cutting the budget by 30%. That can't happen no matter what the Executive wants.

I'm not so sure. The folks who brought us the theory of the "unitary executive" now have a very compliant Supreme Court that might be perfectly happy with Trump ordering his minions to only spend some small fraction of what the Congress has authorized.

But for the most part, the federal government is only one of many factors that affect the macroeconomy, and the policy choices of the President are themselves only a small part of the federal government.

Oh, you’re thinking too literally. Trump allows Ukraine to wither and die, obviously. It might not happen overnight because the EU will step up for a time, but they can’t support the effort single-handedly, and Ukraine is toast.

Seeing the pacifist tendencies of Trump, China will move on Taiwan. That will have gigantic macroeconomic effects on the entire world, because: chips. We saw what a minor shortage of those did to the auto industry during the pandemic, imagine if a significant majority of chip fabs end up under the control of Xi.

Tariffs are another where the President could deliver an overnight shock to the system. I realize that most of his talk is just so much bullshit, but putting tariffs on everything imported - or even most everything imported means that the prices of everything but rice skyrocket even on the shelves of WalMart.

Presidents have at least some sway over the Fed, by jawboning if nothing else. Trump could try - and might even succeed - in firing the head and replacing him with his own compliant stooge. I recall that Nixon pressuring Arthur Burns was the precursor to the inflation of the 70’s, which then got a kick in the pants with the OPEC embargo.

And no, I’m not talking about removing some or even most of the workers in chicken processing plants, potato harvest and the like. I don’t really expect that except a few raids for show (reminds me of prohibition) but still the *possibility* of such exists.

And don’t get me started on RFK taking over health care in the country. In spite of Trump’s promises, I wouldn’t expect that to happen. What could happen, however, if Republicans sweep, is an overnight dismantling of the ACA with attendant effects downstream. Don’t think they’d do it without something to replace it? Ha? They did exactly that last time, and only John McCain foiled the attempt.

As you can see by the examples above and many more, a bull in a china shop, even a well trained one, can wreak incredible damage. Frankly, I expect nothing less, especially given that he is term limited and has even less incentive to listen to his advisors, who in any case will be even more compliant than during his prior administration.

As you can see by the examples above and many more, a bull in a china shop, even a well trained one, can wreak incredible damage.

Sure - but only in that china shop.

My point wasn't that Trump can't do damage - just that the scope of damage he can do is relatively small compared to the macroeconomy and the factors that affect the macroeconomy. Like, 98% of the things that affect the macroeconomy are stuff that the President doesn't control. The President has some influence around the margins of things, but almost everything that affects the macroeconomy is stuff other than the President and his portfolio.

There are a few specific areas that he's got far more influence on. International matters, like tariffs and foreign policy. But even then, he's constrained by lots of other factors. So while the President might have ideas about what economic relations with China should look like, China's got their own ideas - and both of them are shaped by the preferences and actions of literally billions of firms and consumers and workers and financiers in both countries, and around the world. The President has a voice in all that stuff, and it's one of the most powerful ones - but whatever he tries to do will be constrained by the actions and decisions of countless others.

It's easy to construct a "for want of a nail" scenario where one decision by the President changes the macroeconomy - but I personally am somewhat suspicious of that view of the economy. Who the President is important, but so are a lot of other things, and the other things collectively are just much, much, MUCH more important than what the President is trying to do. So while Trump certainly could decimate the poultry processing industry or start a trade war with China, at the end of the day the macroeconomy is going to largely be driven by factors other than him.

Lot of ugly choices at the moment. But, you gotta play the cards you’re dealt.

My estimation that there will be a major screw up at least once in the next few years is approximately 100%.

China invades Taiwan, Russia invades Eastern Europe, mass deportations, draconian budget cuts, SS cuts, nukes in the Middle East (or anywhere - we got ‘em, why not use ‘em), or take your pick out of a dozen other known and unknown macro economic scenarios. Sorry, it’s just my experience with sociopathic megalomaniacs - it never ends well.

This runs contrary to my usual LTB&H philosophy (held tight during 2016-2020, got hammered in the pandemic, and rode it backup), but I am now planning to sell a lot of my stock portfolio over the next few weeks (mostly the S&P type funds) and hold on to the cash (ST CD ladders). Maybe up my TIP allocation a bit, too. I will hold a few stocks I’ve owned for decades because I still like the companies.

Wait for what I think will be the inevitable crash, and then hop back in. Ya, I know. Timing the market is not usually smart. But on rare occasions it can make sense. My gut (or is it spidey sense?) is telling me this is one of those occasions.

Wait for what I think will be the inevitable crash, and then hop back in. Ya, I know. Timing the market is not usually smart. But on rare occasions it can make sense. My gut (or is it spidey sense?) is telling me this is one of those occasions.

The S&P 500 returned about 65% during the four years from January 20, 2017 to January 20, 2021. People who believed that there would be an inevitable crash, and made investment decisions based on that belief, ended up losing out on a lot of return - even though there was a massive crash associated with Covid. Since the bottom of the Covid crash wasn't much lower than where the S&P 500 was when his term started, you'd have to time the market almost to the day in order to even break even on that strategy during his first term....

"Lot of ugly choices at the moment. But, you gotta play the cards you’re dealt."

I share your concern, was not even a little bit impressed with the "leadership" he
displayed in previous term.

Wall St loves tax cuts. And I have a feeling that the phrase "out of control deficit"
is going to disappear from the GOP talking points. This screams inflation to me, but
what do I know. Fixed income gets hurt during bouts of inflation. I will avoid bond
funds. Treasuries or CD's ( short term ) will be a parking spot for a portion of the
retirement funds. But I'm not ready to exit stocks. Very familiar with the phrase
from the last 2 massive financial crisis' brought on during GOP leadership:
"I'm not looking for a return ON my capital, I'm looking for a return OF my capital".
There is some wisdom in that saying. So I share your concerns. But have no idea what the
correct move is, so will be sitting tight, for now anyways.

Wall St loves tax cuts.

Yeah, the exuberance of the market, upon Trump's win, was somewhat rational. His tax cuts that hugely benefitted corporations are due to expire in the not too distant future, with a big negative impact on profits. Now, presumably, those tax cuts will be extended, profits will stay higher, supporting higher stock prices.

Correct me if I'm wrong on this, I'm going off memory.

I'm planning on sitting tight with my stock market investments, because I've mostly not been good at successfully exploiting any notions I've had about market timing in the past. I.e. I got mostly out of stocks ahead of most of the Covid drop, seeing the global pandemic blossoming and damaging the world economy fairly early on, but then I didn't get back in until after the market had recovered, thinking that the bottom had to go lower than it did, given just how wretched the global economy was at the time. So, net negative on that move, though perhaps my risk was lower than market risk.

Right now, I don't see any imminent threat to stock market prices. Could be that go-go times are coming again, at least for a while. Seems more likely than a drop.

Of course something will happen to turn the market around at some point, but for now, the traffic light seems set to green. That will eventually change, when signs of the next recession show up, perhaps.

According to Perplexity.ai, "The corporate tax rate reduction to 21% from the Tax Cuts and Jobs Act (TCJA) of 2017 is not set to expire in 2025; it was made permanent. However, other provisions of the TCJA, particularly those affecting individual taxpayers and certain business deductions, are scheduled to expire at the end of 2025."

Thanks, Labadal. Looks correct.

"Of course something will happen to turn the market around at some point, but for now, the traffic light seems set to green. That will eventually change, when signs of the next recession show up, perhaps."

Think me, it's time to lighten up a bit more. That will bring equities down to about 30% of assets. There is little need for me to be greedy and, while I can't pin down when, I'm figuring that it will not be a recession that tilts things, but rather the uncerrtainty that a shift in the policies of our new national leadership will cause. In a world where, sooner or later, things revert to the mean, hitting that line will offer a better buy-in level than here. In the meantime, my perception is that the differential in mid-term return from stocks may not be justified by the increaase in risk when cash is still earning over 4%.

We'll see.

Jeff

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