Recent momentum for Pete Buttigieg in the Democratic primary comes as something of a relief for market participants who, thanks in no small part to a relentless propaganda campaign amplified by CNBC, are scared to death of an Elizabeth Warren nomination.
We call it “propaganda” because irrespective of what you think about Warren’s policy proposals (which, it’s safe to say, the majority of Americans haven’t even read, despite them being readily available on her Medium account), you’ll probably agree that if it’s an objective take you’re looking for, Leon Cooperman and other billionaires aren’t the folks to ask.
After all, Warren wants to tax them in order to fund progressive agenda items and, tearful allusions to “caring” notwithstanding, they don’t want to pay more in taxes. Nobody wants to pay more taxes.
For those interested, we’ve endeavored to explain what Warren’s policies would actually mean for investors. You can read more here and here, but suffice to say that while rolling back the tax cuts would obviously put a dent in corporate bottom lines, a Warren presidency would not be the end of the world for US equities.
One of the points we’ve tried to make when broaching this subject is that it would be a mistake to completely write off the distinct possibility that when you eliminate two massive financial albatrosses (i.e., the cost of healthcare and servicing student debt) from around the necks of those with the highest marginal propensity to consume, good things can happen in an economy that lives and dies by the consumer.
And yet, you can be absolutely sure that the socialist scaremongering will continue unabated in the months ahead. In the same vein, Donald Trump will doubtlessly persist in parroting the notion that if anyone but him is elected, the economy will “go down the tubes” (as he puts it) and stocks will crash.
In light of that, we though it was worth highlighting the following pair of amusing charts from SocGen which show that, contrary to the narrative the GOP habitually pushes, US stocks perform far better under Democratic administrations.
“The S&P 500 has usually been positive, with some exceptions” during election years, the bank writes, on the way to noting that “over the course of the presidency is where we see most the difference – Democrats (+39.4%) have been more supportive for the equity market than Republicans (+13.9%)”.
Obviously, there’s a ton of nuance to be had in this discussion (all manner of factors influence equity returns and it makes little sense to benchmark a presidency to the S&P), but that always makes for an amusing juxtaposition with GOP talking points.
Speaking of amusing juxtapositions, the following chart serves as a simple reminder (and anyone with a sense of America’s fiscal history doesn’t need to be reminded of this) that pretensions to fiscal rectitude on the part of Republicans aside, “no one party tends to increase federal budget spending more than the other” (as SocGen writes, in the same note).
Under Trump, the deficit has exploded, even as the unemployment rate loiters near a five-decade nadir. In other words, the US economy didn’t need deficit-funded stimulus, but America got it anyway, putting the country on an even more perilous fiscal path than it was already on. That, courtesy of an ostensible “Republican” president.
Trump’s misguided, late-cycle stimulus push created the totally anomalous chart aberration shown below (have a look at the disconnect on the right-hand side below).
Again, there’s a ton of nuance not captured in all of the above, but the point is simply that you should take the cacophony of dire warnings about what’s “sure” to happen to the economy and stocks if a Democrat is elected in 2020, with a grain of salt.