Who the Stock Market Says Will Win
A trip down memory lane... Who the stock market says will win... This could take a while... No matter what, we've got you covered... Doc's latest COVID-19 briefing... Your feedback about 'soft power'...
We're feeling a bit nostalgic today...
It's the day before Election Day... which has us thinking about this time four years and one pandemic-induced recession ago. You know, back when we walked into stores and restaurants... and gathered in groups – no matter their size – with no restrictions.
Many observers – especially those in the mainstream media – were stunned when Republican nominee Donald Trump was declared the winner at nearly 2:30 a.m. Eastern time on November 9, 2016. To anyone who was paying close attention, though, it was not a shock...
In the final days before the election, in fact, we noted that signs pointed to a Trump win over Democratic nominee Hillary Clinton even though "a Trump victory would certainly come as a surprise to many."
In particular, then-Digest editor Justin Brill pointed out the very reliable "presidential predictor" indicator popularized by equities-research firm CFRA that we also mentioned last week...
As CFRA's Sam Stovall noted at the time, going back to World War II, the benchmark S&P 500 Index's performance between July 31 and October 31 had accurately predicted a challenger victory 87% of the time (seven out of eight instances) when the stock market performance was negative.
Moreover, this indicator has been "right" about every election since 1984. Why has this three-month stretch of stock market performance correlated so well with who wins or loses the presidency?
If we had to guess, we'd say that the forward-thinking stock market prefers the predictability of one party staying in charge of the White House, and that the sentiment is reflected in months-long stretches of positive (or negative) returns in the S&P 500 ahead of Election Day.
To be clear, a challenger in this case is considered someone challenging the incumbent president or the party of the outgoing president. That was the case in 2016, with Trump challenging the position previously held by Barack Obama.
Four years ago, the S&P 500 lost 2.2% of its value during the measured three-month stretch ahead of Election Day, "which suggests Trump should win," Justin wrote in the November 1, 2016 Digest.
This year, from July 31 to October 31, the S&P 500 lost a slim 0.04%. That's not a lot (and that number was a 5%-plus gain as recently as five trading days ago)... But it is what it is (down), and it suggests that Democratic challenger Joe Biden should win this year.
Real money betting lines are also favoring a Biden win...
Our friend and Empire Financial Research founder Whitney Tilson shared last week what he called "the highest expected return bet I've seen in a while – and an opportunity to make 54% in six days [now one day]," by betting on Biden...
Just buy Joe Biden to win the election at $0.65 cents "per share" (meaning real-money bettors give Biden a 65% chance of victory) on betting website PredictIt here.
There are only two possible outcomes: if Biden wins, you'll get paid $1 per share – a $0.35 (54%) profit – whereas if President Donald Trump wins, you'll lose all of your money.
Whitney found seven other betting websites that offered similar odds of Biden winning. Elsewhere, we shudder to mention them given their largely inaccurate performance in 2016, but, yes... many of the pre-election polls are coming up with the same conclusion.
Another piece of historical data suggests a change would not be surprising, either... Since 1932, an incumbent president has never failed to win reelection unless a recession has occurred during his time in office. And of course, we have experienced one this year.
And of course, longtime Digest readers know our founder Porter Stansberry and our editors have long warned that 2020 would mark a huge turning point toward socialist policies in the years ahead...
Biden is considered a more moderate Democrat, but only when compared to Bernie "There Should Be No Billionaires" Sanders and Elizabeth "Goodbye Student Debt" Warren.
Either way, though, it could take a while before the world hears the result...
The last time the S&P 500 was this close to breakeven in the three months before Election Day – and slightly on the negative side, too – it ended with the "hanging chads" debacle of 2000.
The presidential election that year wasn't called in favor of George W. Bush over Al Gore until the Supreme Court ruled on it in mid-December.
This time around, more than 97 million Americans have voted already. In the 20 states that are reporting early party-affiliation data, 45% of mail-in voters have been registered Democrats, compared with 30% who've been Republicans and 24% independents, according to a database put together by University of Florida professor Michael McDonald. (You can look through this data for yourself right here.)
We don't know what in-person turnout will look like tomorrow... and many more pandemic-induced mail-in ballots still need to be counted. Roughly 30 million mail-in ballots have yet to be returned, according to McDonald's research.
The devil, as always, is in the details... As far as timing and what it might mean for the stock market – which loves to look ahead – the question about this year's election is not just "who?" but also "when?"
Only eight states expect to have at least 98% of unofficial results reported by noon the day after the election... and 22 states and Washington, D.C., are allowing postmarked ballots to arrive after Election Day.
The "battleground" states of North Carolina and Ohio, for instance, will accept postmarked ballots through November 12 and November 13, respectively. Depending on how the Electoral College map looks in the days ahead, it's possible things won't be "official" for weeks...
In other words, if you fall asleep early tomorrow night, you might not miss anything but the various talking heads bloviating on TV.
No matter who wins (or when), we've got you covered...
As we've said for the better part of this year, it doesn't matter if the winner is declared on Tuesday, Wednesday, or sometime in early 2021. Whenever it happens, our editors expect a few things to play out no matter what in the years ahead...
Namely, more government spending. It's the one thing that the two major parties agree on... Even if more spending is for different reasons (and the federal deficit has risen 435% in the last four years alone), the result and troubling effect on the value of a U.S. dollar is the same (as is the benefit for "hard" investments like gold and bitcoin).
As we said back in the September 24 Digest, the folks in Washington aren't even trying to hide their feelings anymore. The future, they say, is somebody else's problem.
Stimulus talks will restart sometime after the election and linger into 2021.
As our colleague Dan Ferris said in the August 21 Digest, times like these remind us precisely why a diversified portfolio and proper asset allocation is so important...
You don't hold a well-chosen, balanced portfolio of assets because you believe they're all going to rise in value every week through eternity.
You hold a diversified portfolio because government spending, borrowing, and printing of trillions of dollars creates too much risk of monetary mayhem.
You diversify precisely because you know some assets tend to perform well under certain conditions... while other assets tend to perform well under other conditions.
And as we added in the September 23 Digest...
When you properly allocate, you don't even have to be right about who wins the election, if it's going to be "shocking," or anything else. Your allocation will be right for you.
To this point, our Director of Research Austin Root recently put together our special Stansberry's Election 2020 Portfolio. He unveiled this idea in a briefing with former presidential candidate and "sound money" supporter Dr. Ron Paul that we debuted last week...
This portfolio is dynamic and unlike anything we've ever published in the past, but the idea is pretty simple... And we believe it will help you make money no matter who wins the White House. As Austin describes it in the inaugural issue...
Specifically, there are three sections to this portfolio... Assets we recommend you own no matter who wins... ones to own if President Donald Trump wins reelection... and others to own if Joe Biden wins.
In all, Austin shares the tickers and bullish cases for 16 different investments, half of which he says any investor can and should buy immediately. Then, when we know who the winner is, you should buy into four of the additional positions – depending on whether it's Trump or Biden.
That's when we will know which trends to bet bigger on – like what America's big infrastructure projects will look like in the decade ahead... what will happen next with our broken health care system... and how many taxpayer dollars will be spent on what, in general.
As we enter the final countdown to Election Day, click here for more details on how to access our Stansberry's Election 2020 Portfolio before the greatest upside disappears. (Stansberry Alliance members and subscribers to The Total Portfolio can access this research at no additional charge right here.)
We have a lot of feedback to share today, so we'll end our regular fare here with one more note...
It's the latest COVID-19 briefing from Retirement Millionaire editor Dr. David "Doc" Eifrig and his senior analyst Matt Weinschenk. Some of you may have seen it before...
Last month, Doc and Matt recorded this 21st edition of their regular coronavirus briefings as part of our annual and first-ever fully virtual Stansberry Conference & Alliance Meeting. Now, they've decided to make their conversation available to everyone for free...
In this latest video, Doc and Matt talk about what's on everyone's minds today (besides the election) – the COVID-19 economy. Between restaurants, unemployment, and an uncertain stimulus package, Doc and Matt are seeing some concerning numbers.
They discussed much more during the roughly 30-minute discussion, including the dangers of trusting just any prediction and why early predictions of COVID-19 deaths ranged from 10,000 to 6 million when the pandemic first hit the U.S.
Doc and Matt also explained why it's not helpful to keep comparing COVID-19 to the flu... discussed what the future holds for a potential vaccine and its distribution... and shared one compelling idea on where to put your money to earn safe, steady income today.
Click here to watch or read the transcript of the conversation.
New 52-week highs (as of 10/30/20): Flutter Entertainment (PDYPY).
In today's mailbag, subscriber Terry G. responds with context on why he put his whole stimulus check into bitcoin... And we've received a lot of feedback (both good and bad) on Kim Iskyan's Friday Digest about American "soft power." Do you have a comment or question? As always, send it to feedback@stansberryresearch.com.
"Hi Corey, my comment was certainly meant to have a sarcastic tone. But it's also true, in as much as I did drop my stimulus check on Bitcoin. I'm in the process of accumulating gold, silver, and Bitcoin, so it was an opportunity to boost my Bitcoin holdings a bit. As you noted, I was able to purchase Bitcoin at around $8,500, so I've done quite nicely on the purchase.
"The stimulus money represents a very small percentage of my investable assets, so rest assured that I won't be destroyed in the event that Bitcoin goes to zero. Now, if gold goes to zero, I'm screwed!" – Paid-up subscriber Terry G.
"Hats off to Kim for today's Friday Digest. While it's all too easy to focus on the nuts and bolts (dollars and cents) of what the election means to the economy and our portfolios, his writing hammered home the longer-term impacts that this election will have to America's standing in the world and the ripple effect that has across the globe. Having lived outside the USA now for over 4 years, it gives a person an interesting perspective. The world truly is watching – and not just during election season. Keep up the great work, and see you on the other side of the election (whenever the results are known!)." – Paid-up subscriber Scott H.
"This was the most insightful and important article I've read in the Stansberry Digest in a long time. [Kim is] right that the world knows more about U.S. actions and politics than the majority of our own citizens. He's right that soft power is ever more influential than hard power – just note our complete failures in armed intervention in the last 20 years in the Middle East. China is busy making friends and building infrastructure around the world while we are busy giving tax breaks to people who don't need them and can't find places to profitably invest their wealth. Thanks Kim, for piercing the darkness of U.S. isolation and inward thinking." – Paid-up subscriber Ken S.
"A note to thank Kim Iskyan for his October 30, 2020 Digest that recognizes the value of U.S. 'soft power' in the world. This should not be underestimated since it goes way beyond traditional weapons and other apparently simple solutions for solving national and global issues. The U.S. is the democratic and economic system leader for the world and the goodwill that goes with this brings tremendous benefits to our country. The message of Kim to not squander this goodwill is extremely important and is also essential for our economic well-being. Let's hope we can heed that call going forward!" – Paid-up subscriber Alan W.
"Congratulations to Kim Iskyan for his article 'Why America's Soft Power is More Important than Ever.' Kim nailed it in a way that only an American with experience living abroad can look at our country. This article should be a Must Read for all Americans." – Stansberry Alliance member Nathan K.
"Like you, I have traveled the world in my career. Today's Digest was the best. You are so right on with your thoughts and feelings about the current positioning of the USA. I just hope our elected officials and voters understand it like you and I do." – Paid-up subscriber Rick I.
"Finally, a voice of reason." – Paid-up subscriber John R.
"Kim Iskyan: Kudos to you for great writing and perspective. For most of us, we have a tendency to stare right in front of our front wheel, concentrating on the magnified terrain and obstacles and not looking down the trail further. When we do look further, we see the obstacles aren't so threatening after all, and the ones that are, can be better avoided. But the best part is seeing the landscape and bigger picture, and that allows for appreciation and thought. Your take on America's soft power is a perfect example and I thank you for the enhanced point of view." – Paid-up subscriber Richard B.
"Thanks, Kim, for your newsletter on soft power.
"Stating the obvious takes courage these days. I hope you aren't too slammed for it.
"There are many of us who are really tired of the naive isolationism reflected in so many responses to these newsletters.
"You can't run away from the power, hard or soft, that you have, whether you are a nation or an individual. If you don't take control of it and use it as best you can, others will take control of it and use it for you (actually, against you).
"No matter how many mistakes you make using your own power, and how much criticism you get for it, it will be vastly better than giving it up, which is what happens when decisions don't take into account the needs and situations of friends, whether individuals or nations. Lasting power is never unilateral. So hard to accept, but always true. The bully will eventually fade into irrelevance, and the power vacuum will fill with others, maybe individually weaker, but together many times stronger.
"We have no choice but to engage actively with the world. The problems we face as a species can't be solved by any one country alone, even the USA. Keep the faith!" – Paid-up subscriber Hugh M.
"I see Kim's point about the value of both soft power and hard power, but a balance between the two is not easy to achieve on the divisive world of politics. During the Reagan and Bush 41 years we may have leaned toward hard power. Clinton and Bush 43 were in balance but Obama went too far toward the soft side. Trump has been moving back toward the hard side, but l believe he has not gone too far.
"We need to be cautious about going too far in either direction. We need to use both on a consistent basis. There will always be bad actors and they must feel America's hard power. Those like UK, Canada, Israel and Japan, who have been our allies for generations, must always receive the soft power.
"In the midst of world pandemic we still have the strongest economy, the healthiest people and the best recovery on both counts. That's balance." – Paid-up subscriber Tom M.
"Kim is absolutely correct in saying that the U.S. is losing her 'soft power.' However, he is completely wrong in explaining 'why.' It has nothing to do with being a 'bully,' leaving the Paris Climate Agreement etc.
"Just the opposite is true. My family (as well as thousands of others) came here legally over 30 years ago from Eastern Europe to escape communism/socialism, collectivism, corruption, group thinking, censorship etc. – in the search for freedom, liberty and a better future for ourselves and our kids. Unfortunately, since then, lots of things have changed.
"First of all: we, who experienced totalitarianism first-handed, are scared that leftist ideologies started significantly growing right here in the U.S. Not in the last four years though. Political correctness, brain-washing education system, identity politics, anti-freedom-of-speech, open-borders and anti-guns crowds, global warming zealots and several other precursors for a fascism started to appear in the mid-90s. If you add the latest political circus with impeachment, Mueller investigation, SCOTUS hearings, riots, BLM, defunding Police, corruption of the Presidential Candidates (Hillary and now Biden) and other nonsense – you start to recognize the symptoms of the system you tried to escape several years ago.
"Second: most of the former 'soviet bloc' countries are blooming democracies now. They enjoy more freedoms than we here in the U.S. Several of my friends and countrymen consider coming back. As Kim's friend Alex said: There is more of the 'American Dream' in other countries now than in the U.S. herself.
"I agree with Kim that elections matter. And our friends and allies are watching. Trust me: most of them cheer for a strong America with a strong leader, not the one corrupted and easily compromiseable by Chinese. So go and vote for freedom and against socialist agenda. I and many like me have no other place to escape from dictator's regimes if the U.S. fails into Democratic Party dirty hands." – Stansberry Alliance member Ryszard A.
"I read [Kim] Iskyan's column and it comes across as an indictment of President Trump's foreign policy towards Europe. As an example, most NATO countries have not been making their minimum payments to support NATO for many years. If soft power was employed by previous administrations, it hasn't worked.
"I lived and worked in Europe for 6 years. I've traveled extensively throughout Europe and to other countries in the Pan Pacific area. Most of the people I met were outwardly friendly and grateful for the support they received from our country. Yet, when it came to making changes to our business in Europe, soft power didn't always work. That's when we had to resort to 'hard power' to enforce the changes we had to make to our European operation. If, as an example, you feel that President Obama's 'apology tour' of Europe and the Middle East is your idea of 'soft power,' I believed it to be a sign of weakness to countries like Germany, France and Saudi Arabia, sending them the absolutely wrong signal!" – Paid-up subscriber Louis G.
"Asking NATO to pay up, leaving the ridiculous Paris Climate Accord... that's not giving up soft power, its common sense economics. Soft Power is Middle East peace agreements." – Paid-up subscriber Mike K.
"I am so glad we walked away from those wickedly corrupted organizations that you seem to be concerned about. By walking away from the WHO and Paris Accord we are making a statement that the truth lies somewhere else. Sometimes no matter how hard you try it is impossible to turn around an organization... Cut your losses and move on. There are much better ideas for us to lead the world toward." – Paid-up subscriber Ralph H.
"I thought Kim's take on America's soft power was very apropos in the light of Nov 3rd elections. Be it in diplomacy or in business or personal relationships, trust is the most fragile of commodities. Once broken, it's hard, if not impossible, to regain.
"Many will no doubt agree with President Trump's action on the world stage over the past 4 years as in their view America has given much to the world but has gained little in return. But in this interconnected world it's no longer a binary choice of black or white, as there is now an infinite shade of gray in the middle that must be considered, and that is where soft power is more important that having the world's most powerful military. But if America's promises can no longer trusted, if international agreements signed by one President can be arbitrarily torn up by another administration, if American allies cannot trust that America will be there in their time of need, if American presidents are laughed at by allies and foes alike, then America's place in this world will be greatly diminished for many years to come, regardless who will be occupying the White House after the election." – Paid-up subscriber Richard K.
"Your argument for a strong American brand and the effectiveness of America's soft power over the decades since WWII are well stated. I think the problem lies with our messengers, not the American Dream. The American Dream is alive and well. We have more information and ability to be entrepreneurial than ever before, but when was the last time you saw the American media report any good news? If I watched mainstream media, I would be depressed and down on America and our brand too. President Trump has been a more effective executive leader than any of his predecessors in the modern era. If we have an image problem overseas, then we need to fire the messengers or take a play out of President Trump's book and bypass the media." – Paid-up subscriber Jerry P.
"I think your opinion on Trump and other world powers is all wet. I see it as respect towards our president but with a little fear (in other words strength through power), and with that, you get a lot more cooperation out of other countries. Whereas with Obama no one was afraid because he was just a blow hard and countries walk all over us. Sorry, but in my evaluation, your evaluation is totally wrong and I hope you print this because it's not fair when people in your power position get to print their persuasive opinions and ignore other's opinions." – Stansberry Alliance member Floyd H.
"Personally, I didn't appreciate the article by Kim Iskyan recently shared. I understand the concept of hard power and soft power and when to use them. It doesn't matter to me if persons abroad no longer want to move here, and if they are basing their opinions on television shows such as Friends, then that's unrealistic anyway. It reminds me of the eighties, when foreigners flocked to Texas because they watched Dallas.
"Perhaps we needed to take a hard stance in the last few years. We need the proverbial oxygen mask for ourselves before we can better help others. Lest someone thinks I'm one of those Americans without a passport, I have lived in 2 other countries, speak 2 languages and can get around with a third. I love meeting others from different cultures. However, this article seems critical of Americans who, in my view, are some of the most generous people in the world. People still want to move here, by the way." – Paid-up subscriber Jacqueline B.
All the best,
Corey McLaughlin
Baltimore, Maryland
November 2, 2020