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How much will the stock market fall if Elizabeth wins?


RuleNumberOne
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https://www.cnbc.com/2019/10/01/elizabeth-warrens-rise-has-some-analysts-uneasy-on-health-care-tech.html

 

"...according to Raymond James strategists Ed Mills and Chris Meekins.

 

“We believe Warren is within striking distance of winning both the nomination and White House,” Mills and Meekins wrote. “While countless external events can and will happen between now and Election Day, we believe that the market underappreciates Warren’s ability to capture the nomination and win the Presidency.”

 

While the brokerage noted that their base case is still for President Donald Trump to clinch a narrow victory, his edge in key battleground states appears to have “a ceiling.” A ceiling, Raymond James thinks, Warren may have the best shot of using to her advantage."

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The question also assumes that any one particular President has a significant impact on the economy/stock market. This I would argue is not substantiated by historical data.

 

I agree in general. Hoewever, i think this time may be different. Trump has been very good for businesses in the US and business sentiment soared after he was elected. Warren would be his opposite. More regulation. Higher taxes. Higher costs. Lower profitability = lower stock prices. Business sentiment would plummet.

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The question also assumes that any one particular President has a significant impact on the economy/stock market. This I would argue is not substantiated by historical data.

 

I agree in general. Hoewever, i think this time may be different. Trump has been very good for businesses in the US and business sentiment soared after he was elected. Warren would be his opposite. More regulation. Higher taxes. Higher costs. Lower profitability = lower stock prices. Business sentiment would plummet.

 

I agree with LC and I think that the spike in the stock market when Trump was elected was due to a reduction in the uncertainty premium and/or the ambiguity premium. Just because Trump says over and over again that the market went up because he was elected, does not make it true. The 2016 campaign was so polarizing that the market likely would have gone up regardless of who won.

 

I also agree with Viking that Warren is promoting some absolutely terrible themes if not ideas. I'm not even sure that Viking identified the worst of Warren's ideas and Warren is certainly not the worst that the left has to offer.

 

There are several complicating factors that make it harder to accept Viking's analysis as having any predictive power. I will address three.

 

First, Trump has some absolutely terrible ideas with respect to long-term growth of the economy. Many of his ideas might produce short-term results, but can be very damaging over the long-term. This has been discussed here previously, but I will briefly mention that redistribution of taxes, redistribution through tariff's are not the type of long-term investments in capital or human capital that one would want to see long-term improvements. Plus chaos has a measurable impact on investment in capital, and Trump has been creating chaos. Finally, his seeking to influence monetary policy in order to get reelected is similar to his irresponsible use of debt that lead to the collapse of several of his businesses. So though Viking makes excellent arguments regarding this issues with Warren, we have not compared Warren's terrible ideas to Trump's terrible ideas. They both have plenty so this makes a relative comparison more ambiguous.

 

The second complication is that Warren is a chameleon. Look at the native American issue. If she's willing to pretend to be Native American, I think she can pretend to be anything that is necessary to get elected or stay elected. That could include switching to pro-business positions as soon circumstances allow. She won't be able to do that at this point in the primaries, but it's possible she could do that later, or secretly signal to businesses through backchannels what her true policies will be. Look at Obama's trajectory as an example. People worried that he was going to destroy the country if elected and all sort of crack-pot conspiracy theories were floated about how bad he would be, but once elected he probably was closer or cozier with the big banks than any president in history. The big banks are just one example. Obama just needed to keep that hidden from much of his base.

 

I won't divulge them here, but I have some local and personal insights in to Warren that make me suspect that her fighting for the little guy stuff is not so much a true belief, but more of a vehicle for her, just like being native American served it's purpose at one point.

 

A final issue is that the wheels may be coming off the economy. A recession and market pull-back may be in the making regardless of who is elected. Who knows how business or market difficulties would change the policies of either candidate. Would Obama have had a different relationship with the big banks if he didn't need them so much because he took office during a major financial crisis? I guess we will never know.

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"I agree with LC and I think that the spike in the stock market when Trump was elected was due to a reduction in the uncertainty premium and/or the ambiguity premium. Just because Trump says over and over again that the market went up because he was elected, does not make it true. The 2016 campaign was so polarizing that the market likely would have gone up regardless of who won."

 

You have a selective memory.

 

The night of the election, the stock market plunged when it was announced that Trump won. He was seen as disruptive and not the candidate wanted by Wall Street or status quo: Hillary.

 

Seeing that, Carl Icahn got onto his computer and bought stocks all night long thinking that Trump policies were pro-business, lower taxes and that the market was wrong.

 

He was right!

 

While with Hillary, the market would have likely stayed stagnant or heading down as she would have continued and even increased Obama's policies of high regulation, highest corporate income tax rate in the world. As a result of these policies, GDP growth was highly anemic in 2016 and it was obvious that something needed to happen to break away from 0% GDP growth or even falling into a recession.

 

Cardboard

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You have a selective memory.

 

So, so true - and these guys talk about intellectual honesty in the face of facts.

 

They know that business confidence is a powerful driver of economic activity.

They know that business operators just want to know what the rules are - and not have to worry about silly excess regulation.

They also know that unemployment is at historic lows and much of Middle America is working again.

 

But the facts don't matter, so long as it has anything to do with Trump economic policies.

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Here is a graphical representation of the panic and euphoria during the trading week (Monday to Friday) of the previous four U.S. Presidential elections which are held on Tuesdays.

 

Trump 2016, November 8, 2016 +1.5%

Obama 2012, November 6, 2012 -2.6%

Obama 2008, November 4, 2008 -7.4%

Bush 2004, November 2, 2004 +3.2%

 

Be sure to check the attached files for a better sense of the volatility surrounding the elections.

Screen_Shot_2019-10-02_at_9_25.20_AM.thumb.png.0a79a90b637373749269764dc2814ec6.png

Screen_Shot_2019-10-02_at_9_30.53_AM.thumb.png.6613f6da11344e2c4f913474e60c8bd3.png

Screen_Shot_2019-10-02_at_9_32.45_AM.thumb.png.ee13d2a5dc7e7ffb19b1698f87b4eab7.png

Screen_Shot_2019-10-02_at_9_38.19_AM.thumb.png.c157cb2c48855156fb6f799ce64b78d0.png

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"I agree with LC and I think that the spike in the stock market when Trump was elected was due to a reduction in the uncertainty premium and/or the ambiguity premium. Just because Trump says over and over again that the market went up because he was elected, does not make it true. The 2016 campaign was so polarizing that the market likely would have gone up regardless of who won."

 

You have a selective memory.

 

The night of the election, the stock market plunged when it was announced that Trump won. He was seen as disruptive and not the candidate wanted by Wall Street or status quo: Hillary.

 

Seeing that, Carl Icahn got onto his computer and bought stocks all night long thinking that Trump policies were pro-business, lower taxes and that the market was wrong.

 

He was right!

 

While with Hillary, the market would have likely stayed stagnant or heading down as she would have continued and even increased Obama's policies of high regulation, highest corporate income tax rate in the world. As a result of these policies, GDP growth was highly anemic in 2016 and it was obvious that something needed to happen to break away from 0% GDP growth or even falling into a recession.

 

Cardboard

 

I stand corrected. "Spike" was a poor choice of words. Please excuse my laziness in not speaking more precisely. My intent was to counter Trump's narrative that the market reacted positively to him. Obviously we agree on that point.

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I agree in general. Hoewever' data-ipsquote-timestamp=' i think this time may be different. [b']Trump has been very good for businesses in the US and business sentiment soared after he was elected.

 

I think that the spike in the stock market when Trump was elected was due to a reduction in the uncertainty premium and/or the ambiguity premium.

 

The night of the election' data-ipsquote-timestamp=' [b']the stock market plunged when it was announced that Trump won. He was seen as disruptive and not the candidate wanted by Wall Street or status quo: Hillary.

 

So, so true - and these guys talk about intellectual honesty in the face of facts.

 

They know that business confidence is a powerful driver of economic activity.

They know that business operators just want to know what the rules are - and not have to worry about silly excess regulation.

They also know that unemployment is at historic lows and much of Middle America is working again.

 

 

 

I find it truly incredible that we have these comments from folks who must have skipped past a view of the 20-year chart of the major market barometer (SP 500 index).

 

 

Annualized Total Returns (i.e. with dividends) of the S&P500:

Post Recession (06/09) - Obama's End of Office (12/16): 14.85%

 

Trump's First Day in Office (01/17) to Date (09/19): 12.9%

 

The reality is that the rate of economic growth has not deviated from Obama's term to Trump's term.

Go visit FRED and look at the major macro indicators and it illustrates this.

 

All the talk of "business confidence" "great for business" "silly excess regulation" "business ambiguity" is absolute nonsense because there is zero evidence to support it.

 

Furthermore the discussion over stock market spikes over a 1-3 day period is also nonsense. What is a better barometer of the economic health of this country, a 1 day change in market price, or a 15 year timeline of market growth?

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LC please don't lecture us as your thinking is flawed.

 

What is easier? To have a growing stock market from a bottom or a growing stock market from last few innings?

 

Obama got into office in January 2009 or after all the debacle. Already TARP was in place, bad banks had already failed, etc. It was like shooting fish in a barrel.

 

Then he implement policies to slow down the recovery such as Obamacare, regulations on all kinds of things. So in essence your numbers prove my point as the growth in the stock market should have been much higher than Trump and it isn't.

 

Why is the obvious so difficult for you to understand? Go back in history, look at various policies and please tell me that governance has zero impact.

 

Why has governance so much impact with companies but, zero with countries per your thesis? This does not hold up!

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All the following are the same type as far as the economy and stock market are concerned: Bill Clinton, George Bush, Barack Obama, Hillary Clinton, Donald Trump. It didn't make a difference who was in power.

 

But Elizabeth Warren and Bernie Sanders are a different breed.

 

Elizabeth and Bernie are not gifted public speakers. They are very old and have zero charisma. Their only claim to fame is the promise of trillion-dollar bribes to everyone in sight.

 

Bernie said 2+2 = 7 and didn't make it.

 

Elizabeth said 2+2 = 12 and is getting very close.

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Elizabeth winning the nomination is a no-brainer to me. Bernie's voters will break for Warren when it becomes obvious he is not going to make it.

 

Here is a trillion for you, a trillion for you too, a trillion for the people in that corner, a trillion for the people sitting in the front, a trillion for the people in the parking lot. Everybody line up and pick up your trillion.

 

As the election season progresses, the math keeps progressing:

2+2 = 12

2+2 = 15

2+2 = 20

2+2 = 25

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LC please don't lecture us as your thinking is flawed.

It must feel that way when data is used to support an argument.

 

Why hasn't Trump eclipsed Obama's growth rates, despite slashing corporate taxes and removing "unneccessay" regulation?

 

Or to put it more bluntly, why don't you have evidence to support your argument?

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Elizabeth winning the nomination is a no-brainer to me. Bernie's voters will break for Warren when it becomes obvious he is not going to make it.

 

Here is a trillion for you, a trillion for you too, a trillion for the people in that corner, a trillion for the people sitting in the front, a trillion for the people in the parking lot. Everybody line up and pick up your trillion.

 

As the election season progresses, the math keeps progressing:

2+2 = 12

2+2 = 15

2+2 = 20

2+2 = 25

 

We've come a long way from the "Obama phone" days.

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LC please don't lecture us as your thinking is flawed.

It must feel that way when data is used to support an argument.

 

Why hasn't Trump eclipsed Obama's growth rates, despite slashing corporate taxes and removing "unneccessay" regulation?

 

Or to put it more bluntly, why don't you have evidence to support your argument?

 

LC, I don't think your thinking is flawed, but my words were flawed. Please don't include my statement as evidence. We actually agree on this one. What I was trying to say was something more along the lines of "Trump claims responsibility for any increase in the market, but the truth is . . ." Calling it a spike was a mistake on my part, especially because spike implies a fast change, which did not happen. Even more importantly, I was trying to make the same point you are. Trump is trying to claim responsibility for something when the facts do not support it.

 

If you wouldn't mind I would appreciate it if you would edit your list in your post or acknowledge that I had already admitted my mistake in a post previous to yours.

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LC please don't lecture us as your thinking is flawed.

It must feel that way when data is used to support an argument.

 

Why hasn't Trump eclipsed Obama's growth rates, despite slashing corporate taxes and removing "unneccessay" regulation?

 

Or to put it more bluntly, why don't you have evidence to support your argument?

 

LC, my original comment was in response to the title of this thread: “How much will the stock market fall if Elizabeth wins?”

 

Looking forward if Elizabeth Warren becomes President my guess is she will reverse the Trump tax cuts. This would reduce corporate earnings. This would result in a lower stock prices.

 

I also expect business confidence would plummet. This would result in much more caution. This might lead to lower investment which would slow the economy.

 

Druckenmiller last year in one of his interviews was very fearful that the US would move from one extreme (Trump) to another opposite extreme (Warren) and this could do real damage to the US economy.

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RTF: There were two parts to your statement (both of which I disagreed with). The "spike" part - call it whatever adjective you want - is just the first part.

 

The second part which I did not bold was your assertion that market reaction was caused by "reduction in the uncertainty/ambiguity premium". Really this should be "discount" not "premium" but the point is you are trying to link Trump's business policies  with market growth.

 

My point is that market growth is independent of this policy. Had Obama's policies on tax and regulations stayed in place, I would argue the market and economy would generally be where it is right now.

 

LC, my original comment was in response to the title of this thread: “How much will the stock market fall if Elizabeth wins?”

 

Viking, you replied to my post...I was simply (re-)replying :) But the point is, I disagree with the statement, "Trump has been very good for business".

 

Trump vs. Obama...Incredibly different economic policies.

Market and economic behavior....Incredibly similar behavior under both Presidents.

 

But I think we agree (both you and RTF). I would just amend your statements to: the US marketplace is very, very, very good for business :D

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