Another confusing title for another confusing column.
First, let me wish everyone a happy and healthy New Year. We made it through a rough one last year and I can only imagine this year will be more of the same. The most important thing, as always, is your health, mental and physical. Take care of both and the rest will fall into place.
Since everyone loves predictions , I will use today’s column to peer into the future a little bit. It’s a fools game I know but what else can I write about on January 2nd?
Today’s column is one of those combo columns, business and politics all rolled into one easy read.
I’ll start with the business side of things and say, yes, the market will have a follow through on 2023, but it will not be a 25% gain in the S&P.
The economy is due to slow down and my guess is that it will, during the first two quarters of this year. Not a recession but very, very mild growth and stocks will reflect that for the first 6 months of this year. There could even be a pullback as earnings reflect the slowing economy.
This slowing earnings period may be a reflection on the producers losing the pricing power they have had over the last two years. People will be spending less, prices will drop and the wage increases that workers have gained over the last two years will put more pressure on corporate earnings.
The downside to that wage pressure is producers will be motivated to reduce head counts to maintain those stellar earnings.
This is where recessions potentially start. The backside of an inflationary period. This rotation of the power of pricing will impact stocks and that is why you will see a softening in the market for the first two quarters.
However, the Fed will once again be the Knight in Shining Armor and come to the economy’s rescue once again. Cutting rates and making bold moves around those rate cuts.
You have to figure it will take two JOBS reports before they act, so like everyone else, I think you will see a 25BP downward move in interest rates in March.
The second 25-50BP move will be in May and that will be it. Any other moves will look too political closer to the 2024 Presidential election.
How does that relate to the market? The third and fourth quarter will be mostly about retracing the damage done in the first half of the year. Typical for an election year BTW. I can see that late stage rally producing new highs but not much more.
One typical political move during a reelection cycle is spending money in swing states. Government throws some well placed dollars in Pennsylvania or Wisconsin and what do you know, the present administration gets a couple of much needed wins.
I am going to say that I think for the first time in dozens of years, that won’t happen. Why?
Because the Biden Administration has taken a beating regarding their fiscal policies and I would like to think they have learned a lesson about Federal spending and inflation. They spend more money (money that they don’t have) to strategically win back voters, it will backfire.
Another of the Democratic party’s plan to retain the White House was to open the borders and have as many of these illegal migrants get on voter rolls. I know this is an unproven theory but I am really not sure why they would they allow this to happen. American needs to be getting younger, not older? I can buy that one but there are legal ways to increase immigration. A legal, consistent process may not be what they want because getting people processed legally to enter this country and become citizens, with the right to vote, typically takes 12-18 months (or longer). Joe Biden doesn’t have that time.
Which brings me to the election.
The GOP is in trouble. Donald Trump is a walking time bomb of illegality, and hubris. Yet, given even modest support from some well placed Republicans, he will be put back in office. That is how bad a candidate Joe Biden is.
It is well known I don’t like Donald Trump but as a President he adds a dimension that no other President since Ronnie Reagan adds. He has nerve. He stands up for this country and is not afraid to go against the grain and tell it like it is.
Sure, he sounds like a bully and some petulant rich kid at times but thats the point. Our adversaries really don’t know if he is talking out of his rear end or if he is going to light up some airfield in Tehran. You just don’t know.
The problem with Obama and Biden (Obama’s proxy) is that they can put Red Lines in the sand and never back it up. You think Vlad Putin would have invaded Ukraine if Trump was in office? I would say, probably not.
The Chinese may be a different matter altogether but I honestly feel like they want the weakest President in modern memory in office rather than Donald Trump. My spidey sense tells me, it really won’t matter however, they will do what they will do regardless of who is in the White House. The only difference will be the response and while they pretty much know that Joe Biden won’t be able to act, they really don’t know what Donald Trump will do.
It may not be the big talking point of the election but you can be damn sure the Chinese will be very interested in this Presidential election.
Here is where I think we need to look at how the two parties differ.
The GOP is not really grooming anyone just in case President Trump does not make it to the election in November. All the candidates that have been out there trying to push the needle aren’t all that appealing. Nikki Haley could be the one but she has shown that she may crack under that intense pressure a campaign brings down on a person. Ron DeSantis has fumbled precious opportunity after precious opportunity and he has basically blown it. Vivek Ramaswamy was my guy and next thing you know, he has pretty much disappeared. Chris Christie, he says some really good things yet he is just so unappealing as a person. Am I missing someone?
It’s not much of a bench and that actually is much more important this year than in elections past. Usually, there are several decent candidates and you just hope your party picks the one with the best chance of winning. This year, all the choice have huge warts and there is no princess to kiss that frog.
The Democrats have a different issue. They have probably the worst candidate in history declaring his intentions and there is no one there to tell him no. He is faltering mentally and has dialed his exposure back to a level unseen in modern American politics. Will he even go out on the campaign trail? Doubt it. The optics are not good for President Biden and in this day and age, optics are extremely important. He has presided over a recovery that was basically on the backs of the tax payers, now and the future. He has allowed our borders to be breached by masses of illegal immigrants. He has a son, who quite possibly can implicate him in some serious illegal activities. He has the worst VP in modern history. Yet, the powers that be want him to run. Why is that?
Because he can be easily manipulated.
The Democrats do have a pretty good bench though. They do have people that could withstand the accusations and vile spilled from Donald Trump’s mouth. Let’s face it, if it comes down to it, Donald Trump on a bad day will eat Joe Biden alive in a debate. Is that what the Democratic party wants? Exposing Joe Biden like that?
It actually is sad that we have a senior citizen who does not think he has lost anything in his game. Like Willie Mays playing centerfield for the Mets. Difference is, Mays may misplay a fly ball and the Mets may lose, Biden misplays Iran or China and that is a whole different ballgame.
All of this is obviously above my pay grade. I get the Trump thing at least. He has a very powerful loyal constituency. Say what you will, his supporters are dedicated and devout in their support.
Biden’s supporters? Progressives that have ruined some great American cities or tech moguls who are ruining America in different ways. The one thing that Joe Biden has and Donald Trump will never have is the support of a vast swath of the media landscape in this country. The one place where bias should never rear it’s ugly head is in the press and there it is.
It’s really too early to tell how this will all play out and I am not going to make any prediction about this election coming up because the variables are many, but I will say this, it will be more divisive than any other election we have had in our lifetime.
👍👍Agree!