election day +3

As I began to write this just before 9 am est, news came in that Biden has pulled ahead of Trump in PA, after also showing a miniscule lead over Trump in Georgia earlier in the day.

This presumably explains why Trump sounds even more detached from reality than usual, why Fox News and other enablers are slowly distancing themselves from him and why Democrats are radiating confidence despite the fact that I personally don’t see support for any of this in the vote numbers. This last is most likely because I know very little about the way political information flows.

The stock market doesn’t stand still while I’m scratching my head, however. Two approaches: believe what amounts to the technical analysis of political insiders without really having any edge, or try to figure out how to make the election results not be a key variable in my investment decisions. So I take off my hat as a human being and put on my hat as an investor.

A decades-long business career plus the past four years amply demonstrate that Trump’s economic IQ is as close to zero as one can get. The pandemic in the US will likely be more deeply economically damaging, and for longer, than elsewhere. A second term for the self-described “very stable genius” would imply the economy continues to get worse, with no chance of bounceback. If Biden wins, he inherits the gigantic economic mess Trump has created. The pertinent questions, I think, are: what can Biden do to repair the numerous holes in the bottom of the boat, and what he will do, given Democrats’ chronic lack of focus on economic health.

My only partly formed thoughts:

–Trump’s immigration policies have clipped about at least a third off domestic GDP growth potential. Reversing them should be easy, suggesting GDP may surprise on the upside as soon as mid-2021

–eliminating/reducing tariffs. I have no problem with economic policies that advance the US national interest. But Trump’s strategy, if that’s the right word, of turning the clock back to the 1950s damages the US beyond the dreams of Beijing or Moscow. Since they’re imposed mostly/entirely? by executive order, reversing the worst of them should also be easy. This would imply pain for sunset industries, a plus for structural change beneficiaries

–anti-infrastructure/anti-science/anti-education bias. Barring foreign, full-tuition-paying university students is easy to reverse. But there seems to me to be a deeper cultural/political divide about the rest.

My conclusion, so far: under Trump there’s no hope for a GDP rebound soon. Under Biden, investors have to entertain the question of when to begin to play the idea of positive GDP surprise. I’ve already begun to shift slightly away from IT (stocks whose strength depends on continuing pandemic) toward retail and toward Hong Kong-traded China. More on this last topic next week.

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