But despite all of where we are right now in an election season with 20 days left, we would be remiss not to go down the portfolio and give you the skinny on what happens if we get a Biden victory versus a Trump victory, so you are ready for either contingency. And that is at the heart of this call.
Now before I get started, let me say that a situation where Trump loses but does not vacate the White House is a total mess. That will produce negative returns, of course, but not as bad as you would think if only because the virus is really determining so much that it will quickly reassert itself as a dominant force even if Trump refuses to vacate the premises. I don’t want to waste too much time talking about the virus from the 30,000-foot level. I will do it with our stocks in mind, though.
Before we get to the individual stocks, let’s go over what works best for the market. A divided government. Why is that? Because the stock market does best when Washington can’t do anything. The sole instance I can recall – the sole instance in 40 years of trading – where politics actually helped stocks was when the Republicans passed the tax legislation that cut corporate taxes and put a huge amount of money in corporate coffers. It was then used to hire people.
Yes, people were hired. Come on, cut it out. Buyback stocks and raise dividends. And those are not sinful. Hey, we’re in the stock market. We want buybacks. We want dividends. I would always rather have the private sector have the money and create the jobs that they do and expand than the government have the money and often squander it. So I preferred the lower taxes to the corporations because they would produce more profits. And they did.
However, if Biden wins and takes both houses, we will have a decline, initially, and then a snapback for reasons I’m about to reveal. If Trump wins and we have a divided House and Senate, well, you’re looking at what’s happened. And if Trump wins [and] both the House and Senate are Democratic, then nothing gets done whatsoever – which again cuts in favor of the market going higher.
Now, that’s a lot of situations that are good news for stocks.
And just in case you’re freaking out about the idea that Biden becomes president and the Democrats sweep in Congress, you’re going to get a stimulus bill to beat the band. It’s hard to be really negative on stocks with that much stimulus, as we know that Speaker Nancy Pelosi would like at least double what the GOP is offering.
Remember she needs – she’s worried about states being strapped and laying off people. She’s worried about hospitals. She’s worried about the small businesses. And it looks like that the White House right now is more focused on small business. But each stock will stand on its own two feet when the smoke clears and we know who is president.
For more election coverage, check out the Presidential Polls Index for the latest polling in key battleground states.