February 20, 2019

The President’s Day break seems to be a propitious time to point out that the pre-election year has been the best historic year since 1940 in the stock market, a winning year for 18 of the last 19 election cycles, up an average 15%, and we’re up 11% so far this year, so there’s no reason to think 2018 is an exception.

Since 1940, pre-election years have delivered more than twice the average gains of any other year in the election cycle. Why? Pre-election years tend to rise more than most years since Americans are usually optimistic about the “hope and change” that new candidates bring in the months before an election.

The last pre-election year, 2015, was an anomaly since the presumed winners in 2015 looked like a rather dismal re-run between the third Bush (Jeb) and the second Clinton (Hillary), neither of which aroused much enthusiasm – even in their own Party, much less the population at large. To add to the gloom in 2015, U.S. GDP slowed to a snail’s pace (+0.7%) in the second half of the year, hence a small -2.2% decline in the Dow in 2015. That malaise eventually led to an unexpected victory for Donald Trump.

Handicapping 2020 – Waiting for the “Adults” to Arrive

As I read the Constitution over this President’s Day weekend, Article II painted a fairly easy picture of the President’s job. His tasks are mostly ceremonial: He is an appointer of various offices, pardoner of selected miscreants, communicator in an annual State of the Union talk, commander in chief (not in the field, but as a civilian controller of armed forces), and he can make treaties, with 67% Senate approval.

In the last century, however, we have wanted more of a king, an all-powerful imperial President, doubling as the “leader of the Free World,” operating well outside the Constitutional bounds. This time around, we face the prospect of up to 20 Democratic hopefuls in 2020, with the first announced candidates calling for radical changes far outside the Constitution’s enumerated powers for either Congress or the Presidency:

  • Medicare for All (proposed by Senators Bernie Sanders, Kamala Harris, Elizabeth Warren, and 13 other Senators) would replace all private health insurance with a federally-administered single payer. Some bureaucrat 30 to 3,000 miles from your doctor would decide what drug to pay for, what care to deliver, and how much to pay. Private insurance would be banned. The program would cost at least $3.5 trillion a year – more than doubling all current spending, doubling taxes.
  • The Green New Deal (proposed by Rep. Alexandra Ocasia-Cortes and endorsed by 70 other Representatives and four Presidential candidates) calls for the elimination of fossil fuel energy production by 2030, eliminating 99% of all cars and airplanes, the gutting of virtually every building in America, not to mention free education for life, free housing, free food (but no beef!)
  • A Corporate New Deal (proposed by Elizabeth Warren) calls for businesses with over $1 billion in annual revenues to make employees 40% of board directors, while requiring outside governors to insure that the company provides vague “benefits” to society beyond mere profits and revenue.

These programs and others include a guaranteed job for all and vastly higher taxes. Ms. Ocasio-Cortes favors 60% to 70% tax rates for the “tippy-top” taxpayers (yes, that’s her quote from 60 Minutes). Mr. Sanders wants to raise the top death tax rate to 77%. The House Ways and Means committee wants to raise the payroll tax to nearly 15% (14.8%), which comes on top of federal, state, and local income taxes. Ms. Warren wants to add a 2% wealth tax on assets above $50 million and 3% on assets above $1 billion.

There are a lot more programs for bringing the American economic engine to a halt, but these comprise a fair sampling of their opening offers. This, of course, puts the Republicans in the role of trying to save capitalism from the plundering hands of the kleptocrats. If one of these many socialist candidates wins in 2020, we can expect a recession and market crash in late 2020 or early 2021, but if some adult enters the party from stage left – perhaps Joe Biden or even Howard Schultz – he can lend some sanity to the race.

Joe Biden has been known to say some very silly things when schmoozing for votes, but he certainly comes across as far more adult-like than the army of other Presidential choices facing us these days.

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. *All content of “Growth Mail” represents the opinion of Gary Alexander*


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