Markets are Convinced Trump will Win
Markets are in full rally mode on the prospect of a Donald Trump victory at the polls.
For the past year, markets have gone up whenever Trump's odds were good.
And markets went down whenever the sun shone on Biden or Kamala.
We can see it clearly in the Nasdaq, which is dominated by growth stocks, meaning it's more responsive to changes in economic prospects.
Starting from 13,000 a year ago, the Nasdaq rose in lock-step with Trump's odds of winning. By July 10, with Biden collapsing in the polls, it was at 18,600.
At that point, of course, the Dems panicked and replaced Biden with cackles, followed by the mother of media gaslighting campaigns to shove her down voters' throats -- er, to introduce Kamala to voters.
That gaslight sent the Nasdaq plunging 2,000 points in just 2 weeks as Trump's betting market odds went from 67% to just 45%.
Then in early September Trump started soaring in the betting markets, going from 45% odds to, today, almost 60%. The Nasdaq jumped with Trump, making up all those 2,000 points, back to the record high on the eve of Joe Biden's defenestration.
Markets Want Trump
So beyond the fat profits for anybody who bought into the Trump bump, there's a few interesting implications here.
First, markets know that Trump is good for the economy. Very good for the economy.
After all, if a 15% swing in the odds of a Trump presidency are worth 2,000 points on the Nasdaq, a hundred percent of Trump is worth quite a bit -- double your money?
Second, this is an interesting real-world answer to the media's relentless drumbeat of FUD -- fear, uncertainty, and doubt -- on a Trump presidency.
Just last week the New York Times rolled out another hoary load warning how Trump will collapse the economy, headlined "American Business Cannot Afford to Risk Another Trump Presidency."
So markets -- representing the collective wisdom of millions of investors and trillions in capital -- are convinced Trump is amazing for the economy. And on the other side we have... liberal arts majors who scribble for the Times.
Can Trump Stop the Recession?
So this brings us to the $64,000 question: will a Trump economy be strong enough to stop or even reverse the coming recession.
In previous videos I've mentioned how Trump 2.0 would definitely take the edge off recession. Because the essence of Trumponomics is lower taxes and lower regulation -- which unleash the job creators who grow the economy.
But is it enough to counter the recession?
So, first, why is there a recession coming.
In short, when you push interest rates really low then jack them really high you get a cluster of business failures. Because low rates mean cheap money, which funds crappy businesses that can't survive when high interest rates make borrowing expensive.
They go bankrupt.
And that cluster of bankruptcies is called a recession.
Now, we've just gone through one of the biggest interest rate whipsaws in history, with zero rates for Covid then the fastest rate hikes since the 1970's.
So centuries of economic theory says there's a huge cluster of malinvestment liquidations coming, no matter who's president.
Thing is, who's president still matters because the cluster of liquidations is the baseline, but it can be a lot better or a lot worse depending on taxes and regulations.
With the right president, they can take the edge off, even cancel the recession. Or they can make it worse.
What’s Next
It's possible that we skip the next recession if Trump comes into office -- not likely, but possible. Not likely because it’s very likely the recession has already begun, and economic policy takes awhile to have an impact — one rule of thumb is at least 18 months.
On the other hand, I think if Cackles takes the cake we're guaranteed not just a recession, but a fairly brutal one on a par with 2008.
In the meantime, if you think Trump's going to pull it off, it's probably a good time to buy.
Every week I write a newsletter on the top stories in economics with regular deep dives into history like the Fall of Rome, the Weimar hyperinflation, or FDR’s Great Depression.
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The markets like anyone who will fill the economy with electronic pesos from Heaven. More spending means more inflation and rising rates which means more spending and on and on and much of that money finds its way into the markets because otherwise you could never have all of them rising at once. These government clowns could never have enough money if they sucked every dollar from the planet into the DC Swamp as well as converted every other currency into dollars and added that into the pot.
I’m cautiously optimistic!