This posting is going out just as many millions of anxious Americans head to the polls today to vote. “There will be weeping and gnashing of teeth.”
The Wall Street Journal:
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The President of the United States, or his/her political party, does not and cannot control the multi-year bullish PRIMARY TREND direction of the stock market. Negative geo-political news events always turn out to be mere (temporary) speed bumps along the way; they can slow, but they cannot stop. The primary trend of the market is like a powerful freight train that refuses to fully stop until it reaches its destination. By its very self-generated power, it eventually moves everything and everyone out of its path. A bullish primary trend, like we have currently, normally lasts for 6 years and the most recent one started in the Fall of 2023, just one year ago. So, do the math.
A bull market tends to go up regardless of the controlling party or what actions those in control might take. Stocks are naturally biased toward the upside. Stocks are not politics and they are not the economy and they are not one’s emotions or opinions. Owning stock shares in your investment account gives you a ‘share’ in the profits of corporations. If corporate earnings are going up or if they are expected to go up, then stock share prices go up. Yes, it is that simple, and U.S. corporations do especially well with generating profits and passing those profits on to their investment partners, their ‘share’-holders… and this means YOU.
This chart shows from the year 1900 to today; it also shows why stocks are much less dangerous than many investors believe because the market has an obvious upward bias over very long stretches of time… sometimes sideways, mostly up. [Chart courtesy of Ritholtz]
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Another view of the same thing. [Chart courtesy of Charlie Bilello]
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But the stock market does hate uncertainty; the chaos around the 2024 election has caused stocks to move higher at a slower pace, but they have moved higher. Likewise, the chaos of a negative Presidency might also slow the pace, but not the direction of the bull. After the election winner is officially announced, which in a worst-case scenario could take weeks, stocks will move higher again (see the red line to the right of the vertical dashed line). [Chart courtesy of Goldman Sachs]
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We are in a self-directed, double-strength stock bull market: concurrent cyclical and secular bulls. Overlapping secular bull cycles last for approximately 18 total years and this one started in the Fall of 2011. Again, do the math. In my opinion, while no President or political party can derail the direction of a bullish stock market, they may be able to somewhat alter the strength of the market, at least initially. But a bull market eventually acclimates to literally anything & everything and it just keeps moving forward without actually getting derailed. So, I remain very bullish for the coming 4-5 years: earnings are great, the Federal Reserve and most Central Banks are very stimulative, low current margin use levels, consumers still flush with spending money and $7,000,000,000,000 (just in the United States) sitting on the sidelines waiting to come back into the markets… and that is all very powerful fuel to keep the bull market chugging along.
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Please remember to vote today. DEMOCRACY = VOTING = DEMOCRACY
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Thanks for reading!
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MARKET CYCLE — TREND FOLLOWING — SECTOR ROTATION — FACTOR INVESTING — HEDGE FUNDS
