Trump vs. Hillary: Investment-Wise Does It Matter Who Wins?

From an investment perspective, it doesn’t matters who wins.  Stocks and bonds are insanely valued either way. They have been that way for years. Median P/E is now the highest even measured, exceeding that during the dot-com bubble.

Some believe a Trump presidency would give us “uncertainty”.  That meme is ridiculous. There’s always uncertainty. When there is certainty, it’s usually wrong. Anyone remember the nearly universal notion that home prices always go up?

War Uncertainty

Hillary’s proposed no-fly zone is more likely to get us into war with Russia than anything Trump would do.

General Joseph Dunford, Chairman of the Joint Chief of Staff, recently told the Senate armed services committee “For us to control all of the air space in Syria, would require us to go to war, against Syria and Russia. That’s a pretty fundamental decision I am not willing to make.”

For details, please consider Dear Senator McCain, Our National Security is Threatened by You, Your Policies, and Your Soulmate, Hillary Clinton.

War threats be damned, Hillary wants a no-fly zone.

Trade Uncertainty

Deep down, Hillary’s trade policies are similar if not the same as Trump’s.

Hillary wants a global trade prosecutor. That’s something she could probably get by mandate.  In contrast, Trump’s wall would require funding from Congress, something no one believes is coming. No one believes Mexico would pay for the wall either.

In practice, the threat of a global trade prosecutor is worse than the treat of Trump’s wall, simply because a wall is highly unlikely.

Spending Uncertainty, Rate Hike Uncertainty, Valuation Uncertainty

“Nearly everyone underestimates current risks while also overestimating their ability to escape the next major downdraft. Thank the Fed.”

1. Under either Trump or Clinton, would deficit spending stop?
2. Is the Fed more likely to hike under one vs. the other?
3. Is the stock market more ridiculously overpriced under Trump than Clinton?

The obvious answers to those questions are no, no, and no.

None of this means that stocks will do anything in particular. They could rise or fall, no matter who wins. But history does suggest it is unwise to participate in economic bubbles, and central banks have blown another.

Three-fourths of the worlds bonds trade with negative yield. Median stock prices are the highest in history.  On October 4, in what I call Pension Bond “Halloween” Madness,  Alaska governor Bill Walker hatched a plan to borrow money at 4% from Asia to buy equities hoping for 8% annualized returns.

Toggle bonds, where yield is paid in more bonds, not cash, are back in vogue. The last time  was 2007, right before the housing crash.

Everything Under Control?

Gold has been weak lately, mostly on expectations the Fed is going on a big hiking spree and the dollar will strengthen.  Both premises are highly questionable, at best.

Note that gold fell from over $1900an ounce  to under $1100 an ounce shortly after ECB president Mario Draghi stated: “We will do whatever it takes to save the euro, and believe me it will be enough”.

Gold acts as a measure of faith that central banks have everything under control. The rise of gold in 2016 suggests the market is again questioning faith in central banks.

What to Do?

CNNMoney had a recent article telling us the market will rise 2% if Hillary wins but fall 8% if Trump wins.  Note the irony of placing precise values on uncertain measures of uncertainty.

For further discussion, please see Pricing Uncertainty: How Will Stocks React If Trump Wins? If Hillary Wins?

Others propose TINA (there is no alternative) to stocks and bonds. I disagree. Cash is a prudent alternative. Gold is a prudent alternative.

Playing in speculative bubbles is never prudent.

Nearly everyone underestimates current risks while also overestimating their ability to escape the next major downdraft. Thank the Fed.

— Mike Mish Shedlock (@MishGEA) October 10, 2016