The Odds of a Trump Win Just Jumped

The assassination attempt of Donald Trump... How the market responded... Trump is now the front-runner... Numbers and narratives... Context clues... It's not a third-world phenomenon... Things can change...

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'What do you think the market will do?'...

A good friend, who works in real estate development, posed the question yesterday afternoon. Our kids were swimming in the pool, having fun. The adults, something else.

My friend was asking, of course, how I (Corey McLaughlin) thought the market would react today after what happened Saturday evening at a Republican rally in Butler, Pennsylvania. I'm of course talking about the assassination attempt of Donald Trump. Had the bullet that clipped Trump's right ear flown one inch in another direction, I might have had a different answer...

But by luck or by God, as Trump says, he's alive...

So I told my friend that while I couldn't be certain of the future, if anything, 20-year-old Thomas Crooks' failed attempt to kill Trump would probably boost the odds of him winning the White House again in November. And as regular readers know... that prospect could be good for the market – in the short term, at least...

Turns out I undersold the idea to my friend... Today, the benchmark S&P 500 Index and Dow Jones Industrial Average hit new intraday all-time highs again. The Nasdaq Composite Index was up, too. And the small-cap Russell 2000 Index outperformed, up roughly 2%.

Bitcoin is up roughly 6% in the past 24 hours. Bonds are steady. Gold was up "only" less than 1%.

The odds of a Trump win keep increasing...

The growing expectation for a Trump win in November has been playing out in markets since Trump and President Joe Biden's "debate" last month.

It feels almost trivial to mention now – given an assassination attempt of a former president and current candidate less than 48 hours ago – but the S&P 500 and tech-heavy Nasdaq were up seven trading days in a row after the first presidential debate on June 27.

As soon as Biden gingerly walked on CNN's set and began whispering that night, serious questions emerged about his viability as the Democratic nominee in November, much less winning the White House again. Roughly 50 million people watched that made-for-TV event.

However, I suspect many more people in the U.S. and around the world – investors included – have seen at least a brief video clip of the chaos on stage and in the crowd at the rally early Saturday evening when bullets rang out – and Trump's spontaneous reaction to it.

"To take a bullet, then stand up and fist-pump to the crowd?" my friend said. "That's who we need at the negotiating table." We're a society where images and the latest lead of the news cycle matter. My friend also mentioned taxes mattering a lot to his business.

As we've mentioned, the prospect of an extension of the 2017 Tax Cuts and Jobs Act legislation has been one of several bullish catalysts for the market in recent weeks, though that short-term momentum won't last forever.

And we have to mention the tragic and heroic death of Butler volunteer firefighter, father, and husband Corey Comperatore... and the disturbing thought of politically motivated violence in the U.S. ahead or civil war.

With the prospect of more violence, the "bullish story" could change quickly.

But as I digest the market's reaction today (and Trump's initial comments about his brush with death), it sure appears that, perversely, a level of uncertainty about the result of November's election has been resolved (for now).

If this holds, it removes one of the significant questions investors were considering heading into 2024.

Conversely, should developments work in support of Biden's or another Democratic nominee's favor, it could stoke volatility in the markets now that Trump as the front-runner is the prevailing expectation.

The numbers and the narratives...

The idea of a Trump win – which was 50-50 just a few months ago – is now the favored outcome in real money bets and in systems whose sole business is predictions.

For example, of the roughly $260 million put to work in the betting platform Polymarket about the 2024 election winner, 71% of the money is on Trump (up from 60% before Saturday), 18% on Biden, and another 6% on Vice President Kamala Harris.

Another real money betting platform, PredictIt, has the chances of a Trump win at 68%.

Online forecasting platform Metaculus puts the chances of Trump winning at roughly 75% today, up from 55% from last month.

For those interested, our Dr. David "Doc" Eifrig wrote about these "predictions markets" several months ago in his Retirement Millionaire newsletter and offered advice for how to navigate this election season...

Doc and his team also shared a list of 13 "keys" to the election winner, created by Professor Allan Lichtman of American University. As Doc shared...

It has correctly called for every presidential election since Ronald Reagan won a second term in 1984.

All you have to do is tally up 13 "keys" to the election. These keys rely on the things that have historically given a candidate an advantage. For instance, if you are the incumbent, you get one "key." If the economy is not in a recession, the incumbent gets another key.

Some of these keys aren't entirely objective – and could be swayed by ideology. But systematizing your thinking will give you an advantage.

In April, this system was leaning toward Biden. But as Doc wrote...

For Trump to win, he'd need more social unrest, a bigger Biden scandal, or trouble in the economy between now and the election.

Since then, we've seen the first two. People may disagree, but I consider an assassination attempt "more social unrest" and Biden's debate performance a form of "scandal," though not the salacious kind many people associate with the word.

The third swing factor that Doc mentioned – a weakening economy – is entirely possible as well. With a rising unemployment rate over the past few months, you could argue that it is already happening.

Also, some context clues...

It might be trite to say "we've seen this before," because we haven't had a live assassination attempt on a U.S. president in decades, but there are some context clues we can point to for how politics in the U.S. may proceed from here.

We've recently seen the influence of political polarization around the world in various nations and elections. Our Director of Research Matt Weinschenk shared this excerpt from a Bloomberg newsletter with me today. I find it to be spot-on...

... the rest of the world is also experiencing the polarization of politics and what can happen in a deeply divided society when the political discourse is riddled with exaggerations and lies that are then amplified via social media.

From Asia to Europe and South America, the past few years have seen assassination attempts against a range of top political leaders in broad daylight.

In May, Slovak Prime Minister Robert Fico – a populist leader in the style of Trump – was shot four times at close range by a lone wolf. He survived and promptly seized upon the assassination attempt to ramp up his attacks on the media, prosecutors and the opposition.

If anything, it's become about retribution against his enemies.

And as for all this could play out in the U.S., one has to only look back to 2018 for an eerie precedent with Brazil's Jair Bolsonaro, a political figure who is almost a cookie-cutter Latin American version of Trump.

The far-right leader was stabbed in the stomach at a campaign rally a month before elections. It was a defining moment that fired up his base and propelled him to power.

This isn't just a 'third world' phenomenon, either...

The facts are, four U.S. presidents have been assassinated (Abraham Lincoln, James A. Garfield, William McKinley, and John F. Kennedy), while two others survived attempts (Theodore Roosevelt and Ronald Reagan). But many other plots never came to light.

Roosevelt's assassination survival, while unique, draws eerie similarities to Trump's. Roosevelt was running for president again as a progressive three and a half years after he'd left office in 1909. He was shot while campaigning in Milwaukee.

A folded-over 50-page text of a speech and a metal glasses case in Roosevelt's breast pocket is credited with slowing the .38 caliber bullet fired at his chest.

Trump, in an interview with reporters from the New York Post and Washington Examiner on Sunday night from his private plane after it landed in Milwaukee for today's Republican National Convention, said, "I'm not supposed to be here. I'm supposed to be dead."

He would be if he had not turned his head slightly to the right to read a chart on illegal immigrants. Instead, he's alive, bandaged, and, for the moment, reflective. The outcome should galvanize his base and could swing independent voters.

Trump said he threw away his planned speech for tonight's convention – about the "horrible" current administration – in favor of something new after what had happened to him.

"I want to try to unite our country," he said.

Whether the intention becomes reality remains to be seen. But we've just been reminded how quickly expectations can change. And for now, the market is pricing in a Trump win later this year.

New 52-week highs (as of 7/12/24): Agnico Eagle Mines (AEM), Alamos Gold (AGI), Alpha Architect 1-3 Month Box Fund (BOXX), Berkshire Hathaway (BRK-B), Brown & Brown (BRO), Cintas (CTAS), Electronic Arts (EA), iShares MSCI Emerging Markets ex China Fund (EMXC), iShares MSCI South Africa Fund (EZA), VanEck Gold Miners Fund (GDX), GEO Group (GEO), Barrick Gold (GOLD), Intercontinental Exchange (ICE), iShares Convertible Bond Fund (ICVT), iShares Core S&P Small-Cap Fund (IJR), iShares Russell 2000 Value Fund (IWN), Nuveen Preferred & Income Opportunities Fund (JPC), KraneShares MSCI Emerging Markets ex China Index Fund (KEMX), Kinross Gold (KGC), Kinder Morgan (KMI), Lumentum (LITE), Eli Lilly (LLY), London Stock Exchange Group (LNSTY), Altria (MO), Nuveen California Quality Municipal Income Fund (NAC), Newmont (NEM), Novartis (NVS), Pembina Pipeline (PBA), Planet Fitness (PLNT), Ryder System (R), Regeneron Pharmaceuticals (REGN), Royal Gold (RGLD), Invesco S&P 500 Equal Weight Technology Fund (RSPT), S&P Global (SPGI), Texas Pacific Land (TPL), Tyler Technologies (TYL), United States Lime & Minerals (USLM), Wheaton Precious Metals (WPM), and Health Care Select Sector SPDR Fund (XLV).

In today's mailbag, some of your feedback on Stansberry Research founder Porter Stansberry's Friday essay... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Man, what an absolute delight to once again read a Friday Digest written by Porter! When he departed the premises a number of years ago, I came very close to packing up and leaving also. If it hadn't been for Dan Ferris, I probably would have.

"Anyway, it was so great to hear from you again, Porter. And don't sell us all short. I will begin working on your recommendations soon." – Subscriber K.Y.

"Porter's article is full of very useful information and I am going to keep it in my emails so I can reread it several times.

"I believe it was 1936 when John Maynard Keynes developed the concept of 'Priming the Pump' with government spending to stimulate the economy and bring America out of the depression era. I think this was done to improve the lives of the populace.

"It has been troublesome to me to see the Federal Government spend massive amounts of money since January 2021 to 'fundamentally change America' so that a small group of people can enrich and empower themselves. This spending has very little or nothing to do with improving the lives of the populace.

"So, where have the trillions of dollars been spent, where is the economy being impacted, and what is it doing to the stock markets? Inflation has been rampant, the stock markets have been extremely volatile, and uncertainty has invaded the economy and lives of the populace.

"Thank you for the article and sharing your thoughts." – Subscriber Michael U.

"I am writing not to find fault with Porter's thoughts, but to add a very simple concept that is frequently inferred, but almost never discussed specifically. The subject is: what is money?

"Porter mentions the Fed creating money out of thin air. Bluntly, that's counterfeiting. But there are times when that must be done, temporarily, to avoid the monetary system from freezing up, because emotion has exceeded logic.

"Now the key point I want to make... The only true way to create money is to pay off a loan, with interest. The interest is the new money created because VALUE to the economy must have been generated to pay the interest beyond the amount of the loan. Without value, money is just an idle concept.

"Personally, my definition of money is that – it is a proxy for the value required to consummate a barter agreement (we barter all the time, by choosing where and why we shop for our own concept of value).

"Thanks for the opportunity to share my thoughts." – Subscriber Norm R.

All the best,

Corey McLaughlin
Baltimore, Maryland
July 15, 2024