The Final Countdown
The Regime Predicament, Trump On Rogan & The Potential Impacts Of The Election On The Markets And The Economy
I know that at least half of you are probably humming the chorus to The Final Countdown now, but I think now is a decent time to revisit a post I wrote in August. We have just over a week until Election Day, and I have a lot of thoughts rattling around my brain after the trip I had last week to Nashville, and some of the conversations I had there. It’s been a busy couple of weeks, but I wanted to weigh in on the political side of things before the Election, and how the outcome could impact financial markets and the economy.
I spend a lot of time listening to podcasts on a variety of topics, and I have heard multiple times from different people on investing podcasts “I don’t want to get political, but…” or something along those lines. I think it is the case that a lot of people, including investors, have at least one eye on the election right now. I would prefer to hear honest political opinions from intelligent investors, but that might take some time. I think we are way past the point of walking on eggshells and filtering what we say when it comes to politics so we don’t offend people. I certainly have my biases and views that plenty of people won’t agree with, but I think have a pretty good feel for where the US is politically and where we might be headed (I’m biased on that too).
Let’s Get Political
Like I have said before, I think this year sets the table for the rest of the decade, and the upcoming Presidential Election is a huge part of that. Before I really get into it, I want to rewind a bit. If I told you at the beginning of the year that Trump would be indicted four times, convicted once, and survive two assassination attempts at the beginning of the year, you might think that his campaign would be in a rough state heading into the election. Instead, he has been pulling away in the polls (and gambling odds, for what it’s worth) over the last month. At the start of this year, I wrote that I thought Trump would win the election, assuming they don’t cook the books. If the rumor mill about Kamala’s internal polling is over the target, I wouldn’t be surprised if the electoral map looked something like this.
The Regime Predicament
The assassination attempt on Trump in July was a close call, and things would look very different today if it was successful. As things stand today with Trump opening up a sizable lead in the polls, the current regime finds itself in an interesting predicament. The most likely outcome in my opinion is that Trump wins the election and is inaugurated in January. That would certainly be a bitter pill to swallow for the people that love to compare Trump to the Mustache Man, but logic never was their strong suit. Will we see another round of fiery but mostly peaceful protests? It’s possible, but if that does happen, I don’t think it would be on the same scale as 2020. Some people have talked about a third assassination attempt (either before the Election or Inauguration Day), but I think that is very unlikely at this stage. If we get this outcome, Kamala will have to certify the election as VP, adding insult to injury.
Another potential outcome is that we get a redux of the 2020 election, and Kamala magically gets 90M votes (Biden somehow got 81M in 2020). There is already a portion of the US that views the current government as illegitimate, and I think that portion would probably increase dramatically if Kamala is installed. I don’t want to get derailed on political theory, but questions around Consent of the Governed would probably start to get louder in certain parts of the country. If you consider some of the controversial policies (DEI, ESG, the transgender circus, immigration, etc), foreign wars that clearly aren’t in the best interests of Americans, and the current divided state of the country, a Kamala victory just leads to more questions than answers.
If this is the outcome, it’s basically a continuation of the status quo where Kamala takes Biden’s place as the figurehead for whoever actually makes the decisions. The last potential outcome is a disputed election where things get chaotic, but I think that’s unlikely, and I honestly have no clue what the roadmap looks like for this outcome.
Joe Rogan: More Important Than The Mainstream
Before I get into what I think might happen after the election in financial markets and the economy, I want to take a brief detour into Trump’s recent appearance on the Joe Rogan Experience. It’s worth a watch if you have the time, but they talk about a bunch of different topics. It already has well over 20M views on YouTube, but they covered everything from releasing documents on JFK’s assassination to the food supply, and Trump’s plans for what he would do if is elected to a second term. I would love to see Kamala go on the podcast to give everyone an opportunity to compare and contrast the two, but as of right now, it looks like that won’t happen.
Trump vs Kamala For Financial Markets
At this point, I think most market participants are flying by the seat of their pants when it comes to the election, and the pundits or talking heads that tell you they know the exact impact of a Kamala or Trump victory are blowing smoke in my opinion. There are only a couple things that seem like a consensus at this point. One of those is that everyone seems pretty confident on is that deficit spending isn’t going to slow down, and neither will the growing debt levels. It seems like it might be tough to have a recession if that’s the case, but good luck keeping a lid on inflation in that scenario. The other thing is that it seems like there is a huge push to reindustrialize the US, and I think that will probably happen no matter who wins the Presidency.
After that, you get into the “what if” scenarios pretty quickly. What if Kamala actually puts an unrealized capital gains tax in place? That would set off a pretty interesting (and probably disastrous) chain reaction, but I think it has a snowball’s chance in hell of actually coming to fruition. How many big donors and power players, even on the left, really want an unrealized capital gains tax? On the other side of the tax coin, what if Trump gets rid of the income tax and replaces it with tariffs like he talked about on the Joe Rogan Experience? Is he serious about that, or is it political posturing? What would that mean for deficits, overall debt, and various asset classes? Like many of the other things Trump has talked about on the campaign trail, I’m sticking with the “I’ll believe it when I see it” approach, but the income tax vs. tariffs debate is an interesting thought experiment.
Will Trump actually have an impact on the energy sector with his “drill, baby, drill” approach? Trump winning the election might be negative for the oil price in the short term, but I don’t think he has a magic wand to change the geology of the Permian. Will he actually be able to open up the ANWR in Alaska to oil and gas drilling? If he does, how long does it take for significant production to come online? I would guess at least 5 years, but there are a lot of variables there. Would he be able to fast track nuclear plants, either large ones or SMRs? Are there other impacts on coal, natural gas, or LNG?
On other asset classes, how would different election outcomes impact the broader stock market or bonds? Is Trump more bullish for the S&P than Kamala? If we get deregulation and tax cuts, probably. How would the potential tariffs impact different sectors? Is Trump bullish or bearish for bonds? I would guess bearish, but is Kamala better or worse? I’m sort of in the boat that the bond market will have issues regardless of who becomes President. The reasons could be different, but I have a hard time making a bull case for bonds for anything more than a potential short term trade if we do get a recession.
Geopolitics & Immigration
Like I said earlier, I think a Kamala victory would lead to the status quo on foreign policy and immigration. Trump seems confident that he would be able to bring an end to the conflict in Ukraine. What that looks like exactly is hard to guess, but I think the Middle East is a bigger question mark at this point. I hope that I’m wrong on this, but I wouldn’t be surprised if things escalate in Israel, Iran, Gaza, and Lebanon before year end. Would Trump be able to calm things down there? I don’t know, but I would be less confident on that compared to ending what is going on in Ukraine.
The other thing that I highlighted in my piece earlier this year was immigration being a main issue in this year’s election cycle. Trump and Vance have talked at times about remigration / mass deportations, but like the tax changes, I’m in the wait and see camp. Trump has said in rallies that he would use the Alien Enemies Act of 1798 to go after criminal networks here illegally. From my understanding, that’s not the only law they could use, but the government would actually need to enforce some of the laws that are already on the books for them to be effective.
Anecdotes On The Economy
This last piece is going to be more anecdotal, but I think it’s worth sharing bits and pieces from several conversations I have had over the last couple weeks. I have talked with multiple people in real estate (homebuilding, construction, renovation), insurance, and trucking. The real estate guys are basically in wait and see mode with interest rates and the election, but they are optimistic on 2025. The insurance guys have some different views depending on what their focus was and their location, but they were both excited about Trump. Trucking has been a bloodbath for the last couple years, but I think it’s arguably the most interesting set of anecdotes I have heard recently.
It shouldn’t be too surprising that the real estate guys are excited by the 50 basis point rate cut (and the possibility of more cuts), insurance guys always make money and have interesting areas of knowledge, but trucking can be a recession indicator (at least for chunks of the economy). Speaking from first hand experience, trucking is already in a recession and has been for well over a year. I have talked to several drivers as well as people in dispatch, and they think 2025 is the year things finally turn after what happened in the post-COVID trucking boom. In short, they think the real economy is going to rip if Trump is elected.
We will see what happens, but despite the trucker stereotypes readers might have, many drivers are very sharp, and have their finger on the pulse of the real economy where they are driving. Over the last year, I have talked to a bunch of people and they think the economy would do better if we do get a second Trump term. This might just be my bias (and the bias of the people I talk to) coming into play, so feel free to take this with a grain of salt. If most of the country views Trump as generally good for the economy and financial markets, at what point does that turn into a self-fulfilling prophecy? I don’t have any way to measure the psychological impact of a Trump victory on the economy, but I think it is food for thought.
Conclusion
Sometimes I sit down to write and have no idea exactly how a post will turn out. This was one of those. I think that no matter what side you are on, you’re probably ready for this election cycle to be over. I think that a Trump victory next week is the most likely outcome, and there is something to be said for the momentum of the Trump campaign while the Harris campaign has faltered over the last month. I think it’s the best outcome for the US, but I’m biased on that opinion. I’m optimistic that he would be able to pump the brakes on what is going on in Ukraine if he is elected, but I’m not sure on the Middle East and what could happen there over the next couple months.
Kamala could get installed, but I think that would take a pretty heavy thumb on the scale to make it happen. There are a lot of downstream effects of the election depending on who wins and what policies are put in place. Is Trump posturing on many of his campaign talking points? Or will he follow through? Does Kamala have an October surprise up her sleeve? Or is her slide in the polls a sign that a Trump blowout could be in the cards? There is a lot riding on this election, and we are certainly living in interesting times. Either way, the outcome of the Presidential Election next week should answer a lot of questions and chart a course for the US for the rest of the year and beyond.
Good article Ben, you managed being objective without emotional very well.
Personally I’m hoping a Trump victory overall will take America away from its dystopian path and be a beacon to the rest of The West currently heading in a terrible direction, we shall see.
You mentioned SMR’s, have you done any poking about in the sector?
Thoughts on Borr getting hammered this morning and if you are adding to your position?