2024 is an election year is the US. Maybe you’re aware.
If this US presidential election is anything like the last one, the world is in for a circus.
As far as anyone can tell, 2024 will be exactly like 2020 in the most important respect: The candidates will be the same. A Trump-Biden rematch is all but assured. According to prediction markets, anyway.
Trump is, of course, under criminal indictment. For most presidential hopefuls, that’d be problematic, but as New York Magazine put it over the summer, “If you are Donald Trump, being under criminal indictment is business as usual and not necessarily a major obstacle.”
In fact, Trump’s legal troubles are arguably a boon to his campaign and it anyway wouldn’t much matter. The GOP primary field is so uncompetitive that Trump didn’t bother showing up for the debates. Barring some legal twist that prevents him from seeking the presidency, he’s effectively running as an incumbent.
Democrats probably should run someone other than Biden, but it’s not obvious who that person would be. It’s not Kamala Harris. Personally, I like the vice president. But not everyone does, and Democrats are so terrified of another Trump presidency that they aren’t inclined to take any risks. Whether Biden is a riskless candidate is debatable, but I won’t adjudicate that here.
There’s also a spirited debate to be had around what another Trump presidency (or really even another Trump candidacy) would mean for the rule of law in America and thereby for the country’s creditworthiness. That’s a bond market concern, and it’s a topic I’ll return to at what I imagine will be regular intervals in 2024.
As for equities, Goldman noted that stocks actually tend to perform poorly during the 12 months before an election versus other years in the cycle. “Since 1932, the S&P 500 has averaged a 7% return in the 12 months preceding the election compared with a 9% average return outside of election years [and] pre-election returns have been even weaker in recent history, with the S&P posting an average return of just 4% in the 12 months ahead of the 10 presidential elections since 1984,” the bank’s David Kostin wrote, in his latest.
The keen among you will note that market turmoil in 2000, 2008 and 2020 may skew the sample. If you exclude those years, US equities returned 9% on average in presidential election periods since 1984 compared to 11% in non-election periods. Goldman sees virtually no chance of a recession between now and the 2024 ballot — just 15%. The median forecaster, by contrast, puts the odds at a coin toss.
Note from the figure that election-year stock returns are entirely down to earnings growth. On average, multiples are flat. I don’t know whether that’s foreboding or not in the current context. The US exited a short, shallow earnings recession in Q3 and profit growth will probably inflect for the better in Q4, but beyond that it’s really contingent on the broader economy.
Kostin went on to note that median real GDP growth in the calendar year of presidential elections is 3.5% looking back four decades. That’s better than non-election years. Profits, he said, generally grow faster as an election approaches commensurate with the economic expansion. The average for S&P 500 EPS growth in election years is 9%, 1.5ppt better than non-election years.
I’m not sure past is precedent this cycle, where you can take “cycle” to mean the economic cycle or the election cycle. Trump is an anomaly in too many ways to count. Without weighing in on the merits of the myriad allegations against him, the fact is, one of the two presumed candidates for the highest office on the planet is accused of conspiring against the country during the last election, and also of malfeasance related to everything from sundry fraud to storing America’s national secrets in his bathroom (among other places). It’s hard to know how his campaign will unfold, what he’ll say, what he’ll do, what he’ll promise and so on.
Biden is an anomaly in that his approval ratings are very poor despite the lowest unemployment the country has ever seen and red-hot GDP growth. There’s no mystery there: People don’t like inflation. But there is some nuance. America hasn’t been as divided as it is in 2023 since the Civil War. The intensity of partisan rancor means polls are hopelessly skewed such that opinions don’t reflect Americans’ actual views about economic outcomes and policy choices, but rather their party affiliation. Inflation could be 2% and Republicans would still claim Biden was mismanaging the economy. The same will go for Trump if he were to be reelected: He could have 5% growth and 2% inflation and Democrats would say the economy was poor.
In addition to all of that, the anomalous nature of the economic cycle coming out of the pandemic makes generalizing past experiences risky. Forecasting macro outcomes is everywhere and always a fool’s errand, but now it’s hopeless to the point of being futile.
Finally, the geopolitical landscape is a mine field. Figuratively, but also literally. It’s at least possible (although unlikely) that the US will be embroiled in a major war — a war with a serious combatant, whether Russia, Iran or, in the apocalypse scenario, China — by this time next year. That would have all manner of ramifications for the campaign, even if equities were inclined to apathy, as is their wont.
For what it’s worth, Kostin also noted that Info Tech was the worst performing sector heading into Election Day since 1984, underperforming the S&P by a median of 5ppt. That’d be bad news at a time when “tech” (with the scare quotes to denote that some of America’s mega-caps aren’t technically classified as tech, even as we habitually refer to the Magnificent 7 as “big tech”) comprises nearly a third of market cap.
Oh, and don’t forget about social unrest. As BofA’s Michael Hartnett wrote this week, describing the socioeconomic zeitgeist in America, “So much anger, so much hate, yet unemployment so low. Can you imagine the social disorder if unemployment hits 5%? That’s why policy panic comes early in 2024.”
My big out-on-a-limb prediction for the next 12 months is that Biden won’t be on the ballot come next November. It’s not because of any one specific reason; rather, it’s because there are enough paths to that outcome it becomes a probable outcome.
It’s like someone on October 1 predicting war will break out at some point in the next 12 months. They might not have had “War in Gaza” at the top of their list, but it was definitely one of many geopolitical hot spots that were on the list. At least one of the items on that list was bound to pop off at some point.
Reasons Biden might not be on the ballot:
1) A medical event. POTUS having access to the highest quality health care on earth notwithstanding, 81 year old bodies have a way of breaking down in sudden and unpredictable ways.
2) Hunter Biden blowback. Thus far the evidence against Hunter, and evidence linking his activities to Joe, are weak. There’s a reason McCarthy didn’t want to bring impeachment proceedings–he knows there’s no smoking gun. While I don’t think there’s any there there, something (or someone) could always turn up that blows things wide open.
3) Primary shocker. There are other people on the primary ballot. They’re people no one has ever heard of, and they’re getting no media attention, but they’re on the ballot. What happens if 30% of South Carolina Democratic primary voters decide to tick someone else’s name just to send the message that they’d rather the nominee be anyone but Biden? The next day, it’ll be nothing but headlines screaming, “Candidate McCandidateface scores 30% of the vote in shocking primary result!” After that, who knows what happens.
4) The That-Was-The-Plan-All-Along scenario. If Biden doesn’t actually want to run again, but wants to maximize the chances for his hand-picked successor to succeed, he just waits until the last possible second to drop out, endorses his personal choice, and gifts them his entire campaign operation. By then it’d be too late for anyone else to build up an operation, and his choice would win the nomination by default. It’s hard to imagine who that choice would be if not Kamala, but who knows.
5) Something I haven’t thought of yet.
Gavin Newsom’s non-campaign campaigning seems to have this very idea in mind. Just in case things open up, he wants to be as ready as possible.
Anyway, it’s a bit like predicting a black swan. You’re usually going to be wrong, and there’s no cost to you for being wrong, but that one time when you’re right, you look like a genius. Anyway, I’m putting my prediction out there now, we shall see.
6) The Intervention: The pantheon of Democratic party leadership, including Obama, sits him down and tells him he has to drop out for the good of the country or else they won’t be his friends anymore and he’s disinvited from family Thanksgiving dinner.
My prediction goes the other way. Trump loses the election interference case and runs up against the 14th Amendment disqualification with months to go before the election. Nikki Haley becomes the Republican front runner and builds quick momentum under the sudden spotlight.
I don’t see the 14th amendment third section coming into play. That would ultimately be decided by the Supreme Court, and I think they would find, on a 9-0 vote, that it didn’t apply. Unlike the merely descriptive “high crimes and misdemeanors,” insurrection refers to actually codified laws. While Trump has been charged with breaking an entire raft of different laws, insurrection isn’t among them. The same is true for the January 6 rioters. Without a guilty finding by a court of law, I don’t think the courts would agree to disqualify a candidate; otherwise, you could just accuse anyone of “insurrection,” on whatever flimsy grounds, and try to keep them off the ballot.
What Trump is accused of is election interference. Insurrection = attempting to overthrow the legitimately elected government, while election interference = trying to change the outcome of an election. It might seem like a distinction without difference, but to the courts (which are all that matters), it’s a world of difference. With election interference, you’re implicitly acknowledging that the winner of the election is the legitimate authority, and thus you’re trying to swing that win to yourself through illegitimate means. In an insurrection, you’re implicitly acknowledging that you are not the legitimate authority, and you’re trying to overthrow them, replacing them with someone else. This, ironically, is a case where Trump’s continued insistence that he was the legitimate winner of the 2020 election actually helps him. You can’t overthrow yourself if you’re the legitimate government after all.
Even the “Proud Boys” (I always snicker when I hear that name) weren’t charged with insurrection; rather, they were charged with sedition. It’s a close cousin, but has more to do with taking up arms against the US Government & trying to prevent it from carrying out the law of the land.
Dude, I’d strongly suggest you stop reading the right wing extremist rags. Nearly half of what you said is false, the other conjecture with no/minimal basis in legal scholarship. It is however the right wing extremist talking points pushed on numerous platforms hoping that enough people believe this false narrative that it will have a political benefit to trump.
The only thing you said that was founded in reality and legal scholarship is that SCOTUS will determine the 14th Amendment issue. A plain-word straight-forward interpretation of the constitution says that trump is not eligible for federal office. Three of the judges on the court are Originalists who claim to support a plain-word straight-forward interpretation of the constitution. Three other judges believe in the rule of law and will likely side with protecting the constitution and American Democracy. 2 judges are whores and will do whatever their billionaire overlords tell them. Roberts is a wild card. Trump’s legal team has an uphill battle from a legal perspective with their strongest argument being it’s never been done before (which is a meaningful claim). It’s completely unclear at this point how this will play out.
PS- You’ll notice that most of the legal scholars who say the 14th amendment has no relevance to trump are all funded by various right wing “think tanks”, meaning they are paid shills of the billionaire class to spread their propaganda. However independent legal scholars willing to take a position mostly say trump is not eligible regardless of the expert’s party affiliation.
And my prediction is that neither Trump nor Biden will be their respective party’s candidate a year from now.
Maga and democracy are not compatible, nor are autocracy and capitalism. Those who would elect maga out of an abundance of hatred toward the enemy (libtards snowflakes regulation etc…) will be crushed when it dawns on them that they are no longer needed by their supreme king president except to work as assassins for the new terrorist leadership government. There is no glory in civil war, and these are glory hounds first and foremost. bar none. As the duped fight between themselves and against their own resident democracy lovers, the new maga government will bring in foreign fighters and mercenaries to police the disaffected defectors from. Markets? ha ha ha ha ha!
Next year is going to be very interesting. As such, I’m starting to think the “Chinese Curse” was actually a prophecy about 21st Century America. I’m also working on an exit plan to gain citizenship is another country.
FYI- in case anyone was wondering “May you live in interesting times” apparently has no roots in Chinese culture, and is a construct of creative British minds: https://en.m.wikipedia.org/wiki/May_you_live_in_interesting_times