Connecting Dots

The distinction between solid analysis and wonky forecasts can be tiny.  As a Portfolio Manager who has spent more than his fair share of time dealing with the media, I am highly mindful of the need for the fifth estate to look for controversy as clickbait.  As the saying goes, opinions are like noses – everybody has one.  The question this begs is “just how credible are the opinions we’re hearing these days”?


There are two themes that I have been hearing a fair bit these days.  The dominant (but by no means universally-held) view in the financial media seems to be the storm has passed, the worst is over, and markets have already resumed an upward trajectory.  The other theme is that, with protests throughout the U.S., and increased sensitivity to Black Lives Matter, a massive bout of unemployment and record-breaking outbreaks of COVID-19, Donald Trump’s chances of re-election are teetering between slim and none.


What I find interesting is that so few commentators have taken the time to link those two presumptive trends.  I say that because there’s a strong first-derivative consensus that should Joe Biden become President of the U.S., he will almost certainly repeal or at least significantly scale back the Trump tax cuts – and likely institute a wealth tax on the ultra-rich to boot.  If those things happen, pretty much everyone thinks it’ll be bad for the American stock market.


My question, therefore, is: “how do so many intelligent, forward-looking people think we can have strong capital markets when it looks increasingly probable that Biden will win in November?”  I have gone on record a number of times to say I think markets are dangerously overvalued.  That remains my position.  What is adding to my concern in July, 2020, is that we’re less than four months away for a Presidential election and the presumptive Democratic nominee is toying with a double-digit lead in the polls… and that no serious commentator thinks the American economy will not take a hit if the lead translates into a victory.  My sense, therefore, is that a number of financial commentators are opining that WANT Trump to win even though most of them don’t think he’ll be able to pull it off.  Analysts seem to be talking with their hearts; not their heads.

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