I'm not a betting man but had I bet, it would have been for Hillary– and the odds being offered would have been terrible for the bettor– and I was tempted to buy stocks when I saw them collapsing last night. That would have been a losing bet, too. Dow Futures were down 750 points at one point. But, today, they are trading in a normal range as the uncertainty of what a Trump presidency would bring set in. The Nikkei was off almost 6%. The dollar dropped over 2% against the Euro and the Mexican peso collapsed by over 10%. But by mid-morning the Dow had turned around and was actually UP 76 points (although health services stocks have continued to crash).
Before voting started, my financial advisor forwarded me something to read about markets and elections and how Wall Street contextualizes politics– Everything Investors Need to Know– and Should Ignore– About the Upcoming Election. The bottom line, of course, is that “well-positioned, well-led companies will create investment value regardless of who sits in the White House.” Hmmm… and what about the other 90% of public companies?
The Market Does NOT Perform Any Better When the “Pro-Business” Party Is in the White House.
A common belief holds that the stock market will fare better when a Republican is in the White House because the Grand Old Party tends to be more pro-business. The related expectation is that Democrats– with their purported preference toward higher taxes and increased regulation– hinder economic and market growth. The historical evidence doesn’t support either notion.
• The markets have done very well, and had bouts of difficulty, during the terms of presidents from both parties.
• In fact, if you look at the returns of the Dow Jones Industrial Average since its invention in 1897, it’s clear the stock market does not favor either party.
• Investors who stay the course are likely to fare much better than those who invest only when one of the two major political parties controls the White House.
…Six Truths that Won’t Be Affected by the Election’s Outcome
1-Gridlock Doesn’t Mean Nothing Gets Done.
The volume of legislation that can get passed will be lessened if the occupant of the White House doesn’t have a majority in the House of Representatives and a filibuster-proof majority in the Senate. Still, gridlock doesn’t mean inaction. Consider, as an example, the progress made on reducing the federal budget deficit during a period of notorious Washington gridlock.
2- Changes in Washington Don’t Typically Come All at Once But in Increments.
With few exceptions (like Obamacare or Dodd-Frank), the United States changes policy, not with one broad, sweeping effort, but rather with small steps. Consider the examples that have been debated for decades but seen few major changes: energy, transportation and immigration policy. We’ve made significant policy changes—for better or worse—in each of those areas, but we’ve done so with repeated small steps, rather than one great leap forward.
3- Campaign Rhetoric Doesn’t Always Influence What Happens During a President’s Tenure.
4- Consumers and Businesses Have a Far Greater Impact on the Economy than the Government.
The overwhelming majority of what happens in the U.S. economy depends on you, me, and the businesses we work for and patronize.
5- The State of the Economy Influences Who Is President, Not Vice Versa.
Decades of history prove that the state of the economy determines the president, not the other way around. In fact, the economy’s impact on elections can be stated in a fairly simple equation: Strong economy (declining employment and inflation) = A win for the incumbent party candidate.
6- The Stock Market Doesn’t Care If the Public Is Happy with Who’s President.
Finally, one lingering fear investors may have is that the markets could suffer if the public elects a president who is already very unpopular or who could become unpopular while in office. Here again, though, history suggests the market is resilient and indifferent to a president’s current approval rating.
Issues that Could Be Affected by the Election’s Outcome
Only a true cynic– and a misinformed citizen– would conclude it doesn’t matter whether a Republican or Democrat sits in the Oval Office. In fact, several major issues are likely to be affected by which party occupies the White House, though if Paul Ryan remains speaker (which seems likely at this point), we might reasonably expect more traditionally conservative viewpoints to remain influential.
2 Judicial Appointments
A Barack Obama-appointed replacement for the late Justice Antonin Scalia will face a stiff battle in the Republican-controlled Senate this year. If an appointment is delayed for the remainder of President Obama’s term, the next President will be able to appoint at least one justice to the court. Given that Justice Ginsburg is over 80 years old, and two more (Justices Breyer and Kennedy) will turn 80 over the next three years, there is the possibility that the next President could appoint several justices during his or her term, thereby shaping the court and its decisions for decades to come.
3 Regulatory Stance
The executive branch has considerable latitude to decide how existing laws will be enforced. Financial services, education, defense, healthcare, environmental protection and energy production are just a few of the areas that executive direction can influence in the absence of legislative action.
As the campaign proceeds, both Hillary Clinton and Donald Trump may begin to reveal more of their views on regulatory issues, including some areas– such as drug pricing– where the president’s regulatory powers may fall short of his or her campaign rhetoric. (Hillary Clinton’s tweeted pledge to end drug price gouging offers one clear example.)
It’s Probably Best Not to Let Your Reaction to Who Wins Shape Your Investment Decisions.
For U.S. citizens and observers in other countries, the U.S. election will, as always, give us sufficient reasons for both optimism and despair. But as investors, whether our preferred outcome materializes or not, we must keep our focus on where economic value is being created under the circumstances that actually occur, not on what would have happened had our choice been realized.
Most of Us Dislike the Other Party More than We Like Our Own
I’ll conclude therefore with a warning: over the past decade and a half, most of us who lean one way or the other have maintained the same skeptical but positive view of our own party, but our view of the other party has gone from mostly negative to quite bitter. That change means that many of us will be highly frustrated, even angry, at the results of the November election.
Stick with Your Plan Under Any Circumstances
On November 9, 2016, be prepared to slam a door or shout down the basement stairs if your candidate and party lose, but don’t abandon your well-thought-out investment plan. Patiently compare it to changed circumstance but don’t let electoral disappointment turn into financial disappointment as well.
This morning Scott Paul, President of the Alliance for American Manufacturing, was already looking for a bright side of the cloud. “We congratulate President-elect Donald Trump,” he said, for a successful campaign, and for articulating a vision of a stronger economy with manufacturing at the center of a strategy to rebuild the middle class. Our nation has long been supported by our country’s makers and we look forward to working with the new administration and Members of Congress as we turn manufacturing and reasonable trade enforcement promises into reality. One of the most defining themes of this election was the economic pain felt by some voters, particularly those within the working middle-class. Communities across America felt left behind as manufacturing jobs disappeared and no single election cycle can erase that. As President-elect Trump prepares to take office, the question becomes how best to restore the American dream for our working people– and that path, for many, lies in the heart of a resurgent manufacturing sector. President-elect Trump and Congress must come together on much needed investment that will put Americans to work building and repairing our nation’s crumbling infrastructure. Stronger trade enforcement to address China’s massive overcapacity and a crackdown on countries trying to circumvent U.S. trade laws can boost manufacturing jobs. Factory workers were more than a prop in this election. Now's the time to deliver for them.”
Good attitude! Paddy Power had one too. Remember them> The U.K. betting house who paid out over a million dollars last month to Hillary betters because they were so sure the election was over and had gone her way? Well, today they announced they're paying out $4.5 million to Trump bettors– “biggest political payout ever.”
After Donald Trump was hit with scandal after scandal the bookie was confident of Hillary's chances – prompting the whopping payout. But Clinton's campaign took a late hit thanks to the reopened FBI investigation which resulted in a huge surge in bets for The Donald.
Féilim Mac An Iomaire, a spokesperson for Paddy Power, said “We’re in the business of making predictions and decided to put our neck on the line by paying out early on Hillary Clinton, but boy did we get it wrong. We’ve been well and truly thumped by Trump with his victory leaving us with the biggest political payout in the company’s history and some very, very expensive egg on our faces.”
Meanwhile, Paddy Power have started taking bets on a number of Trump specials following the Republican’s election such as 4/1 to be re-elected in 2020, 20/1 to build a Mexican border wall and 100/1 to turn the White House gold.
Donald Trump Specials
4/1 To be re-elected in 2020
10/1 To be successfully impeached
6/4 To appear in court during presidency
100/1 Turn the White House Gold
20/1 To build a Mexican Border wall (wall covering entirety of US-Mexican border)
First international visit:
66/1 North Korea
“When fascism comes to America, it will be wrapped in the flag and carrying the cross.” — Sinclair Lewis