Indeed, it has been said that Democracy is the worst form of government except for all those other forms that have been tried from time to time.
– Winston Churchill
It is often dangerous to write about politics. Ok, even more basic, it is sometimes just dangerous to write, but that is what I do for a living, so my neck sticks out, and please leave my jugular alone. One of the interesting aspects of being an author is that I know exactly what I mean when I write something but, sometimes, it is read in another fashion all together.
I preface my article today with all of this because I am not discussing politics for the sake of making some political statement. I am discussing our up-coming mid-term elections because of the influence that they will have on both the bond and equity markets.
Make no mistake here, the decisions made at the ballot boxes are going to have a profound affect upon the markets, in the next few months. The citizens of the United States are about to speak, and the markets are awaiting the outcome. The “voice of the people” is about to be heard.
To be quite forthright, I have no idea who is going to win the elections. I will say that I do not expect any sort of “Blue Wave” though as I commented recently on “Squawk Box.” I used to think there was some validity in the Polls, but I have come to the conclusion that the way the questions are spun determines the outcome of the Poll. It is all just a spin game to try to validate what the people running the Poll are trying to accomplish.
I have developed, after forty-four years on Wall Street, a healthy amount of cynicism. You need it to survive here, because of all of the antics and pimps that are tossed at you daily. I used to think that politics was somehow, somewhat, different. I used to think that there were “some” honorable people in the halls of Congress, but I am less sure of it these days. It is particularly troubling to me that we seem to have lost all civility, politeness, manners, respect, standards, honor, and morals, in our legislatures. Perhaps it is because of my age, my generation, but it seems to me that the country has digressed in recent years, and I am troubled by what has taken place.
What the country needs is dirtier fingernails and cleaner minds.
– Will Rogers
So here comes Tuesday and it is going to be both “Clink” and “Clunk.” The toasts of Champagne glasses in some blue and red galas, in some States, and the misery of defeat in others. We have just celebrated Halloween in the United States. I make the observation of just how much that holiday resembles the American elections. It is a constant barrage of “tricks” in hopes of getting the “treat.”
Just obnoxious!
Historically, the midterm elections have consistently been good for the stock market. Remarkably, this has been true for every midterm election since World War II. The data shows that it hasn’t mattered who won or lost, or which party controlled the White House or Congress, either before the voting, or as a result of it. Whatever the political configuration or the election results, the midterm election season has been a positive for the equity markets.
Yet, I wonder if it is going to be true this time. I have never seen so much rancor or division in the country and so I am taking a conservative approach. I think some cash out of the markets, until we see which way the wind has blown, makes good sense now. “Preservation of Capital” is still my number one, through number 10, rules!
I have some specific concerns if the Democrats do get control of the House. Any moves to impeach Judge Kavanaugh or President Trump could spark some serious market moves in both the equity and bond markets, as well as have a very negative affect on the dollar, in my opinion. In normal circumstances you might think that this would not happen and that cooler heads would prevail. If you see any cooler heads, please point them out to me because I don’t see any in sight, these days. Maybe it is just that getting older has impaired my vision or maybe it is that I learned long ago that holding on to what you have is often a safer course than trying to make more.
Suppose you were an idiot and suppose you were a member of Congress. But then I repeat myself.
– Mark Twain
The upcoming elections remind me of the Air Force. “Off we go into the wild blue yonder.” I had a pilot’s license, at one point in my life, and I owned an airplane, which I flew myself. I have been off into the “yonder” and it is just that I never expected our elections to be a mirror image of those types of adventures. The one thing that is true, when heading off in unknown directions, is that anyone with any common sense wears a seat belt. As we approach Tuesday, I suggest that you strap yourselves in.
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