Two Reasons Why Trump Will Win by a Landslide

An unexpected phone call from a longtime friend... The easiest advice I've ever given... No one is complaining about slumping retirement accounts today... With or without a typo, this strategy is smart... Two reasons why Trump will win by a landslide... This opinion comes with a word of caution for investors...

At the depths of the 'Great Recession,' I (Alan Gula) received an unexpected phone call...

It was from Ryan, one of my longtime friends. We grew up in the same town in New Jersey.

This time, instead of texting me – like he normally did – Ryan was calling. So I figured I should answer.

It was early 2009... The financial crisis had ravaged the economy. More than 5 million Americans had lost their jobs.

But Ryan wasn't calling me because he feared he would soon end up in the unemployment line. After all, he worked as a teacher with relatively good job security.

Instead, Ryan called me because he was worried about his retirement account...

During our conversation, Ryan lamented that his 403(b) – the equivalent of a 401(k) for nonprofit institutions – had been cut in half. And he wanted to know what to do.

At the time, I was working in New York City for investment bank Barclays Capital. While at Barclays, as I explained in the June 22, 2018 Digest, I had a "front-row seat to the crisis."

Despite the carnage in the credit markets I was witnessing, I told Ryan to stay invested. And if possible, he should even increase his 403(b) contributions.

It was the easiest advice I've ever given...

In his late 20s at the time, Ryan still had several decades of investing ahead of him. He had plenty of time to recoup the losses he endured during the crisis. In fact, the market mayhem was a blessing in disguise for Ryan and other young investors (who still had jobs).

Today, no one is complaining about a slumping retirement account. It's quite the opposite...

President Donald Trump is performance-shaming investors...

Tax-deferred retirement accounts come in different flavors... 401(k)... 403(b)... and 457(b) plans for government employees.

These arcane names match the plans' subsections in the Internal Revenue Code. The plan names contain a lot of numbers and letters, so it's easy to get confused.

That's exactly what happened to Trump earlier this month...

On January 9, he once again touted the stock market's gains in a tweet. However, Trump mistakenly described the retirement accounts as "409K's."

Of course, the Twitter-verse pounced on Trump's error...

Some folks tweeted pictures of Formula 409 cleaning-solution bottles, poking fun at the mistake. Other tweets noted the irony... Most retirement accounts are doing so well that the higher number seems warranted. Trump later deleted the tweet and posted a revised one...

But the thing is, with or without the typo, Trump is smart to tout the market's gains...

In today's Digest, I'll show you that the strong stock market gives him a big advantage heading into the presidential election in November. And as you'll see, so does the jobs market.

As if Trump needed any more help...

He's the incumbent. And since 1900, an elected incumbent U.S. president has sought and won re-election 11 out of 15 times. That's a 73% success rate.

Not only is Trump the incumbent, but his Democratic challengers keep shooting themselves in the foot...

Comedian Bill Maher shared some advice for the dozen or so candidates seeking the Democratic nomination on his HBO series Real Time in October. As he said...

This should be easy – just be less crazy than Donald Trump... Stop wearing your most divisive issues on your sleeve. Instead of trying to make the people on the far-left double-dog like you, make some good people in the middle not hate you.

Elizabeth Warren hasn't listened...

Earlier this month, in an interview on news channel MSNBC, the Massachusetts senator and Democratic presidential candidate said she would require all new buildings and houses to have a "zero carbon footprint." Warren has also said she plans to ban hydraulic fracturing ("fracking") – which has helped boost U.S. crude oil and natural gas production – on her first day as president.

Warren's virtue-signaling policies would stop America's energy renaissance in its tracks. They would also exacerbate the housing shortage and make homes more expensive.

Even if Warren were to be elected president, it's unlikely that she would be able to implement such crazy policies due to the government's checks and balances. But if she did, it's extremely likely that they could cause a recession and a stock market crash.

Remember four years ago... when pundits said Trump would cause such a crash?

A crash hasn't happened. And Corporate America is thriving...

Since Trump took office three years ago yesterday, the benchmark S&P 500 Index is up 47%. The tech-heavy Nasdaq Composite Index is up nearly 70% over the same period.

The stock market is surging because companies are producing more free cash flow ("FCF") than ever. FCF is the cash that's left over after subtracting all operating expenses and capital expenditures. At Stansberry Research, we call FCF the "number that doesn't lie" because it's a lot harder to manipulate than net income.

When Trump took office, S&P 500 companies (excluding commercial banks and real estate investment trusts) produced around $900 billion in FCF in the previous four quarters.

Today, that figure is $1.13 trillion – a 24% increase in three years.

This is more a triumph of capitalism than anything Trump has done. Still, that makes it even more advantageous for Trump, given his potential opponents' views... Democratic socialist Bernie Sanders, like Warren, wants the government to control wide swaths of the economy.

Of course, not everyone has benefited from the stock market rally... According to a Gallup poll conducted last spring, only around 55% of U.S. adults reported owning any stocks.

But the thing is, Americans who don't own stocks are still doing well under Trump...

We're in the midst of the best market for job-seekers in decades...

No, this isn't the "strongest economy in our country's history," as Trump suggested on Twitter in early December. But it is among the strongest labor markets in history...

When Trump took office, the U.S. unemployment rate stood at 4.7%. It has since declined to 3.5%, the lowest level since 1968. The unemployment rate among African Americans has fallen even faster, declining from 7.9% to 5.9% since Trump took office in January 2017.

The so-called "underemployment" rate (unemployed, marginally attached, or employed part-time for economic reasons) has fallen to 6.7% in the most recent report. That's the lowest level since 1994, when the Bureau of Labor Statistics started tracking such data.

The labor force participation rate has also ticked up from 62.7% in December 2015 to 63.2% as of the end of last year. That tells us more workers are entering the labor force.

And we're seeing more jobs with higher wages...

I've seen a lot of talk about how the economic recovery has left low-wage earners behind. Yet these narratives seem unsubstantiated. As a piece in the Wall Street Journal pointed out earlier this month...

The comparative data are striking, and mostly ignored by the press. During the first 11 quarters of the Trump Presidency, wages for the bottom 10% of earners over age 25 rose an average 5.9% annually compared to 2.4% during Barack Obama's second term.

The ranks of the middle class also seem to be expanding, running counter to other mainstream narratives... According to IRS data, the number of taxpayers making between $100,000 to $200,000 per year increased by 8% between 2016 and 2018.

Again, it's hard to tell how much credit Trump deserves for the improvements in employment and wages. But his fiscal stimulus has undoubtedly helped.

Regardless of the causes, Trump has significant economic and financial market advantages over his potential Democratic challengers. That brings me to one conclusion right now...

Trump's edges will likely lead to a second term. And the evidence suggests it will be a landslide...

If you tuned in to our roundtable discussion last week, you know Stansberry Research founder Porter Stansberry said that's exactly what he believes will happen.

And as we noted in the January 15 Digest, Porter posed a hypothetical question during the event... "When's the last time an incumbent president lost during a strong economy? It just doesn't happen."

However, this opinion comes with a word of caution for investors...

So far, the stock market has performed well over Trump's first term. But it hasn't all been smooth sailing...

Don't forget that December 2018 was the worst final month of the year for the U.S. stock market since the Great Depression. The S&P 500 lost as much as 15% of its value that month.

And even though the S&P 500 had a total return of more than 30% last year, it wasn't a straight line higher... The market sold off about 7% in May. And then, at the end of July, stocks plunged roughly 6% in a little more than a week.

So even if the bull market keeps churning higher from here, we expect it to be a challenging market environment. And with the election in 10 months – whether Trump wins or is unseated by one of his Democratic challengers – it promises to be a tumultuous year.

That's what makes our Stansberry Portfolio Solutions products so valuable...

With these products, we take all the "guesswork" out of your investing.

They're designed to guide you through good times and bad... It doesn't matter what we see leading up to the election in November. Not only do these products include some of our best ideas at Stansberry Research, but they also help you to optimize your position sizing.

In Stansberry Portfolio Solutions, we offer three different levels for subscribers – Capital, Income, and Total. These levels vary depending on your background... interest in the markets... and what you're ultimately looking for with your investments.

In an event last week, Porter joined editors Dr. David "Doc" Eifrig and Dr. Steve Sjuggerud, as well as portfolio manager Austin Root, to discuss all the Portfolio Solutions products...

Plus, they all shared their biggest market predictions for the coming year and their No. 1 stock recommendations to help you protect and grow your wealth starting right now. And for the next few days, you can watch a full replay of the event for free right here.

New 52-week highs (as of 1/20/20): Lundin Gold (LUG.TO). U.S. markets were closed in observance of Martin Luther King Jr. Day.

In today's mailbag, one paid-up subscriber shares the incredible returns he has made based off our research over the years... Have a comment or question? You can always e-mail us at feedback@stansberryresearch.com.

"With your full-court press on the newest lifetime subscriptions and portfolio offerings, I had to check to see how I've done in my 401(k) by utilizing your research this year. Keep in mind that I've been using your research for a number of years, but when you're telling me The Capital Portfolio did [42%] this year, well – challenge accepted!

"Overall, this year I made 37% on my 401(k) investments thanks to your research, so thank you! I'm not where I need to be yet, but I'm getting closer to my retirement goals because of the help that you're giving (okay, selling).

"Some crazy highlights from my portfolio, which incidentally I only know because of my TradeStops subscription... [Editor's note: In fairness to subscribers to our services, we're not sharing all the stock picks and returns included in this note, but we've included a few so you can get the idea.]

"I've averaged 12.25% return a year on... Johnson & Johnson (JNJ) over the past 4-plus years for a total return of 62.32% (including reinvested dividends). This is currently my worst return for any stock held over one year.

"17.42% per year return on Hershey (HSY) for 3-plus years for a total of 65.29% (with dividends).

"33.49% per year for 3-plus years in Abbott Laboratories (ABT) for a total return of 146.89% (with dividends).

"A year and a half in Microsoft (MSFT)? 55.95%.

"And the granddaddy of them all – A year and a half in Roku (ROKU) for a total return of 214.62%!

"I wouldn't have been able to do any of this without your help and, whether or not I end up with more Lifetime subscriptions, I wanted to be sure to thank you for all of the help you've given me in providing for the future for my wife and I." – Paid-up subscriber Daniel S.

Regards,

Alan Gula
Baltimore, Maryland
January 21, 2020