Some Random Musings - Investment ImplicationsA post to provoke some discussion and pushback.
As I have mentioned in previous posts, it is important to assess political activities and then discern whether any of it has implications for your asset allocation and imvestment strategy. So in that vein, I will talk about a few things going on in the US and my opinion as to what that might mean for investors. Some of these things, I can talk about since when they happened I was an adult and lived through them and in some cases was part of it so I don't need to rely on the press (and especially talking heads who weren't there). I know some here are in the same situation as me and I would love hear what your perspective is and whether it is different from mine.
1...there is lots of talk about the Democratic Convention next week and parallels to what in happened in 1968. The talk is about all the pro Palestinian protestors going to Chicago and disrupting the Convention. IMO there are really no parallels. In terms of the elecorate, the Palestinian issue really doesn't affect the average US citizen. For those that do care, they have already decided which way they are voting (or not going to vote). In 1968, the protests were more violent, the issue directly affected hundreds of thousands of everyday Americans especially younger voters. The issue caused the Democratic candidate to do a massive flip flop and the loss of credibility that goes with that - not the case today.
2....in the polling, the gender gap between Trump and Harris has widened in Harris' favour and if anything can be expected to widen further. This already in evidence with harris now leading all of the swing states except one and this is the reverse of what it was under Biden. This is a big swing.
3...Neither candidate is offering any solutions to reducing future budgetary deficits and if anything both have unveiled plans to make that situation worse. Trump is in favour of reduced regulation and Harris is in favour increased regulation. The combination of Harris' plan will reduce American competitiveness over time much more than that of Trump.
4...The US southern border will remain open under Harris and along with that the increased costs to US tax payers to deal with the influx of illegal immigrants by the millions.
5...A Harris win will likely result in 8 years of Democratic presidency and so the offset to this march towards marxism will depend a lot on downballot results - ie who controls The House and The Senate.
Right now this is pretty much a tossup as to what will happen.
When I put all that together, I get Harris winning in November and a less friendly business environment in the US.
So what about the investment implications of this result?
1...with increased regulation, I see a greater push to EVs and restrictions on the US energy business. At least at first I see this a being a plus for the Canadian oil and gas industry since there could be greater reliance on Canadian energy and higher WTI prices.
2...conversely, greater regulation and much higher annual budgetary deficits could become a huge problem before a second Harris term is completed and this presents an investment risk which needs to be monitored. Right now the stock market is celebrating this huge Government stimulus (Econ 100) but as the old saying "Marxism works great until you run out of other people's money". Given the size of the current US National Debt and the forecast for it based on current approved legislation (and no assumed recession) to grow by 50% as illustrated by the non partisan Congressional Budget Office there is a big storm looming. This storm is also compounded by the fact that before a second Harris term is completed the US Social Security system will be broke. Right now the current interest on the US National Debt is equal to 50% of total Government expendtures under the first Bush Administration (pretty scary IMO). This number will only go in one direction in the future - UP.
What should you do about it?
Well that depends on your age and financial situation. But what is certain is that you need to keep track of these things (eyes wide open as they say) and make adjustments accordingly. As I often said to my younger clients when was working on The Street - "When you retire, my objective is for you to be in the end zone, not trying to kick a 50 yard field goal in swirling winds". If you choose to ignore this situation, rest assured, if you are young, you will be kicking that feild goal!!
The other thing to keep in mind (and I have said this many times before) is that situations like this, also present some great investment opportunities for thoughtful and pragmatic investors. The time to spend time seeking (researching) out these alternatives is now not after the storm hits. As an example, I have talked in the past to look for companies that will benefit from Government mistakes. I believe that under a Harris Administration there will many such opportunities that will provide outsized returns. Many of them are actually in the energy sector such as companies which can provide solutions to businesses to provide security of electrical supply with increasing grid failures. Companies that can reduce costs through the use of renewable energy (I talked long ago about what waste mangement companies like WM are doing) are worth looking at. ENB is doing a full court press to deal with this issue by looking for ways to reduce the billion dollars a year it spends on transportating its gas and liquids. There are others out there if you look and are willing to do the homework.