What a Trump Presidency means for investors

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Earlier this week I spoke with RT about what the Trump presidency means both in the U.S. and abroad and what it means for investors.

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Mornings with Maria

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On Friday October 21st I was on set with Maria Bartiromo, Kat Timpf and Dagen McDowell with a variety of guests. Here are a few clips from those three hours on set… with only one bathroom break… starting at 6am… and a lot of coffee…know my pain.

We spoke with JMP Securities President Mark Lehmann on the stocks to watch in the tech sector and the election’s impact on the markets.

We also spoke with Alan Dershowitz, author of ‘Electile Dysfunction,’ on the impact of WikiLeaks on Hillary Clinton’s campaign. While I’m not a fan of lawbreakers, and hackers certainly count amongst those, these days the electorate is reasonably mistrustful of those in power and these hackers are giving us confirmation that we are correct to mistrust …which is one of the reasons I am in favor of smaller government. The more power government has, the more opportunities there are for graft, and the bigger the temptation to give into such. I prefer smaller government out of respect for the frailties of human nature. I’m in good company here with James Madison who explained it best in Federalist Paper #51.

It was a long chat with Mr. Dershowitz…

As a proponent of the free markets, which also means free trade, I’m a fan of Donald Trump’s plans to reduce taxes, but not a fan of his threats to significantly reduce free trade and to use the power of the presidency to force private companies to bend to his will. As the second largest exporter in the world, our economy needs a healthy level of international trade. We spoke with political economist Andy Busch on Donald Trump’s and Hillary Clinton’s competing plans.

Finally we spoke with S&P Global Market Intelligence’s Rich Peterson concerning the outlook for M&A activity, particularly given the current political environment. As we discussed earnings results so far, I brought up my concerns that the improvement in earnings per share really doesn’t tell the whole story, as companies have been buying back their own shares at record levels. This means the denominator, shares outstanding, keeps falling which makes EPS look artificially stronger than it actually is. I call this the spanx-and-push-up-bra strategy, whereby things may look better from afar, but fundamentally they really haven’t improved.

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Election 2016 – Personality not Policy

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Watching last night’s third and final presidential debate was an experience I’d put somewhere between a root canal and wearing a tight wool sweater in Central Park in July. It seems this year the preponderance of what we hear about Election 2016 is personality, not policy. Bespoke Investment Group recently asked 1,500 households around the U.S. to provide just one word to describe the presidential candidates. These are the results put into word clouds.

2016-10-20-election-2016Regardless of your political leanings. This is a big problem.

Parents now have to be legitimately concerned whether a presidential debate is age appropriate for their children.

Political discourse in the nation has become both absurd and disgusting, with the only rational response for many being a total loss of faith in the system, which leads to a hunker down mentality, which only exacerbates the economic headwinds we face.

If Clinton wins, she will begin her presidency with tens of millions of Americans convinced that she belongs in jail. If the Democrats are able to take the house and Senate, over 40% of the nation will likely be enraged by the ensuing legislation and feel utterly disenfranchised.  If the Republicans maintain the House and Senate, we will likely see increasingly furious and hate-filled deadlocks.

If Trump wins, over 40% of the nation will be utterly enraged by his presence in the White House as growing numbers of his own political party continue try and distance themselves from him. During his campaign has alienated many of those who would otherwise have been great supporters of the Republican nominee. Some see this as a tribute to his “outsider” nature, but once in the White House, that outsider needs to work with others. That will require gaining their respect. During his campaign Trump has shown, much like Obama, that he places no value on gaining the respect of those who have views that differ from his. Perhaps that would change if he wins the presidency, but right now, we just don’t know.

I believe the core of the problem here, the reason that any concept of civility is completely gone, is because government is simple involved in too much of our lives. This means that we all need to agree on one-size-fits-all solutions to a degree that is simply not possible. This was a nation founded on the idea that people of all preferences and persuasions could live peacefully together under a government that was created simply to protect their individual liberties.

If we want to return to civility, we need to respect our individual preferences, get back to running our own lives and by shrinking the scope of government stop running the lives of our neighbors!

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Economy Strengthening?

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We keep hearing, particularly from the Federal Reserve and those in DC, that the economy is improving. Hmmm, let’s look. With consumer spending responsible for roughly 70% of the economy, how about retail sales?

2016-09-19-retail-sales

Ok, so maybe not there. How about employment? We keep hearing about how strong employment has become.

The percent of working-age people who are actually employed is back where it was over 30 years ago. That doesn’t look like a recovery to me.

What about new jobs? The level of job openings looks to be rolling over as well.

As for inflation concerns?

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Not so much there.

But then it is tough to get inflation going when we have a heck of a lot more productive capacity than we need!

As for industrial production, that peaked way back in 2014.

As for that painfully weak GDP growth, if we strip out healthcare costs which have been on the rise as a percent of household spending in recent years, we get an economy that is nearing stall speed.

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Bottom Line: The data is not painting a clear picture of an economy that is strengthening, but rather one that is rolling over, having never achieved even the typical average rate of growth. Keep this in mind when looking at equity markets sporting historically rich valuations.

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Clinton good for stocks?

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On October 14th I spoke with Stuart Varney concerning the impact on investors of a Hillary Clinton win coupled with a Democrat sweep of the House and Senate. While the market index moves so far have indicated a preference for Clinton over Trump, investors aren’t likely to benefit from a Clinton presidency.

A Clinton presidency would mean higher taxes, which is a headwind to growth. She has expressed a desire to increase taxes on investments, which makes them less attractive relative to other options. She’s also discussed increased regulations, which is already considered by the C suite folks to be one of the biggest challenges facing companies today. While the stock market indices have so far been more bullish when Hillary has a solid lead in the polls, investors should think through what her plans would mean for their bottom line as well as the bottom line of the companies in which they invest.

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