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Making sense of the markets this week: January 7, 2024


The current situation in the USA, though, demands clear and concise language, as the ramifications could be potentially awful. It should be impossible to remain neutral on the candidacy of Donald Trump. He represents an existential threat to the very institutions that make functioning markets possible. His narcissism and complete disregard for honourable public service, as well as his comfort with crowd violence, create a terrifying world of possibilities. I think there is a small—but not zero—chance that he may try to illegally seize the election again and could cause widespread civil unrest as a result. 

There is, of course, also a very legitimate chance he could win. 

In that case, I believe we’d likely avoid violent civil unrest, but we’d enter the incomprehensible world of a 78-year-old authoritarian. It could be awful for world trade—and likely for the Canadian economy. It would likely be pretty bad for long-term U.S. productivity as well. 

I do not think it’s a given that Trump would obey term limits and step aside at the end of four years. What evidence do we have that Trump respects any sort of norms or rules? Overall, the chaos and uncertainty that a second Trump Presidency would bring to the table would be terrifying for the world, and pretty bad for investment portfolios in the long term.

I do believe that despite very negative current polling, when push comes to shove (perhaps literally), President Joe Biden will narrowly win a second term. I think there’s a very strong probability that the Republican Party will win control of the Senate, creating a deadlocked government. 

This would be a Goldilocks scenario for U.S. companies—a political situation that’s not too hot, not too cold. You’d have the relatively steady Biden hand at the tiller, who’s been great for the economy by the way. And you’d benefit from the paralysis of divided government, which almost always generates positive vibes from corporations that enjoy entrenched advantages.

Should President Biden win and Republicans control the Senate, I think there would be a fantastic end of the year for the U.S. stock markets. Canadian stocks will likely get dragged along for the ride, to some degree. If Trump were to win, it’s possible there will be a short-term sugar spike in the markets, as tax reductions could be anticipated. But it’s difficult to judge what effects the chaos of destroying democracy will unleash.

Flatlining GDP numbers generating more talk of “Is it a recession or not?” 

Last year, we predicted that overall GDP (gross domestic product) in Canada would hang right around 0% for multiple quarters, and that different parties would try to “spin” that information in ways that made it seem more or less a failure. Our crystal ball shows more of the same in 2024. 



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