Elections, Obama and the Economy

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I am writing this from South Carolina where, in three days, on 20 February, Republicans will vote in their presidential primary. According to the latest polls, Donald Trump is leader his closest rivals by 12 points. The problem is that polls are not votes so, in a few days, we shall see what the actual voters have to say. South Carolina’s is only the second of the Republican primaries, so there is still a long way to go.

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This article, however, is not about who may or may not win the Republican or Democratic nominations (South Carolina’s Democratic Party primary is on 27 February). It’s about what investors should expect in this election year.

Election Year Economics

Jeff Hirsch, Editor-in-Chief of the Stock Trader’s Alamanac, has warned that “We have a lame-duck president on top of some tepid fundamentals and a pretty embattled campaign picture that creates the kind of uncertainty that Wall Street doesn’t care for so much… [we have] a recipe for a market decline here.”

J.C. O’Hara, Chief Market Technician at FBN Securities, examines data to determine correlations between U.S. presidential election years and the stock market. More specifically, he focused on the election years that were the eighth and final year of two-term presidents, which, unfortunately (read on) Barack Obama, is.

What the data reveals is that those eighth-year election cycles have seen the Dow drop an average of 15%. The Dow is already down 6.1%, from 17,425 to 16,367, since the beginning of 2016 – and we are only 48 days into the new year. The really scary reality comes when we compare today’s Dow year-on-year versus 2015, when it had reached 18,000. That is a decline of 9.0%. If O’Hara’s data holds true, we should expect that, based on the presidential election alone, we could be looking at a total decline over the 2015-2016 period approaching 25%.

Obama Economics

President Obama claims to be a constitutional scholar. Frankly, the way he ignores it and abuses the authority and mandate of the Executive Office, a lot of us are not sure that he has even read it. One this is certain: He is not an economist, or even much of an executive.

There are some, like former presidential candidate, Herman Cain, who appear to blame the president for all that is wrong with the economy and the stock market. I wouldn’t go that far, but I would go so far as to say that he has failed miserably to take the right actions to deal with a faltering market and economy in general.

A recent article in on another investment website posed the question, “If Obama Were a CEO, Would He Still Have His Job?” The premise is that “At the start of each year, the president’s economists forecast economic growth for that year. The number is included in every presidential budget. And every single year, GDP growth has come in below what Obama had projected. Every year. These weren’t just small misses, either.” Despite this, the president had the effrontery to claim in his State of the Union Address in January that he had fixed the economy.

The growth projections were “extremely modest” compared to average per year growth since 1945. Using those standards, the U.S. GDP would have  grown by more $2 trillion during his presidency. In fact, if the economy had measured up to his own meager forecasts (the only thing conservative about Obama), the U.S. GDP would be $642 billion higher today.

No, if Obama were a CEO, he most definitely would not still have his job. Who knows – and I am not politicking here – perhaps we will see a day in the near future when someone like Donald Trump points his finger in Obama’s face and says, “You’re Fired.”

That’s the end of my story for today, but here are some additional points to ponder:

  • The NASDAQ down 15% – which is official correction territory (defined as 10% or more)
  • The Russel 2000 is down 23%
  • Retail sales were the weakest since 2009. It was supposed to be flat – but instead suffered the first decline since the 2008 financial crisis.
  • Home builds are at four-year lows
  • Individual stocks down 30-80%
  • Industrial production has been twice as bad as bad expected

I hope these brighten your day.

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