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Markets Will Focus On Elections In The Divided States Of America



  • A political, social, and economic mess paves the way for election day.
  • Three economic issues that investors should be aware of regarding the election are 1) Regulation, 2) Taxes, and 3) Energy. The campaigning will ramp up shortly.
  • Looking for more stock ideas like this one? Get them exclusively at Hecht Commodity Report. Get started today »

In November, the incumbent President will face former Vice President Joe Biden in a contest that could be even more contentious than four years ago. The US is politically divided. Coronavirus has wreaked havoc with the US and global economies. Over forty-million people lost their jobs since March, and the US economy is contracting. US and Chinese relations have deteriorated. Meanwhile, the stock market recovered from its initial move lower in March, as the economy begins to awaken from a self-induced coma. The NASDAQ made a new record high on Friday.

There is a lot at stake in the 2020 Presidential contest for the US and the rest of the world. The nation will decide if the status quo over the past three and one-half years will remain the course until 2024 or if there will be a dramatic policy shift. Markets reflect the political and economic landscapes. As the election nears, we could see volatility in markets across all asset classes increase.

The events over the first five months of 2020 caused a reaction in markets that brings back memories of 2008. With the economy on the verge of a depression, the Fed and government have injected unprecedented levels of liquidity into the financial system. The 2008 financial crisis led to a period when commodity prices rose to multi-year or all-time highs after a deflationary spiral in 2008. By 2011, the impact of liquidity took raw material prices to highs. In 2020, the amount of stimulus is far higher than a dozen years ago. The Invesco DB Commodity Index Tracking Fund (DBC) holds a portfolio of commodities futures contracts. The election and path of the US when it comes to regulation, taxes, and energy production could exacerbate inflationary pressures over the coming month and into 2021. These issues are likely to be

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This article was written by

Andrew Hecht profile picture

Andrew Hecht is a 35-year Wall Street veteran covering commodities and precious metals.

He runs the investing group The Hecht Commodity Report, one of the most comprehensive commodities services available. It covers the market movements of 20 different commodities and provides bullish, bearish and neutral calls; directional trading recommendations, and actionable ideas for traders. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.

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Comments (25)

Pierre Rossouw profile picture
Fossil fuel energy, especially oil, is a guaranteed loser.
AEGISBMD profile picture
They hold 0% Treasury Bills? What? Where is the profit there unless you expect negative rates.
Joelg5 profile picture
Absolutely. A drop from 0% to -1% is as profitable as a drop from 2% to 1% or 1% to 0%. This is the reason banks and funds are buying negative interest rate European bonds in anticipation of even lower negative rates. It is a profitable trade. Market Watch had a good explanatory article on the topic a few months back. Worth searching it out and reading it. BTW, Trump has said that he likes the idea of negative rates. Makes government deficits into a profit-center. For a while anyway.

BTW, DBC up in Wednesday's down market. Bought a few shares to watch. I like that it is unleveraged. Thank you, Andrew.
Joelg5 profile picture
Absolutely superb article, excellent coverage of many issues and I will take a look at DBC. Only thing missing was foreign policy, war and peace. President is Commander in Chief, and main role under constitution is defense of country against foreign invaders (not domestic looters; if MN mayor lets police precincts and businesses burn, that’s his city’s prerogative, not job for POTUS). Trump gets all blame on news for his language on using military to quell domestic violence, but it was effective rhetoric –governors and mayors quickly stopped the looting and burning after Trump used strong language. Very effective use of the bully pulpit. I call that good presidential leadership, though Sunday TV national news shows thought Trump’s strong language was a worse act than looting and burning businesses. BTW, local TV news in L.A. did a great job of live coverage, deserve awards.

I guess we now take an interlude without a major USA invasion or bombing to the Stone Age of a foreign country for granted as the new norm under Trump, or maybe just too many domestic distractions to focus and give credit where credit is due. Peace vs War is major. Clinton bombed Serbia to Stone Age over dispute with Albania of no USA interest, probably as distraction from his domestic problems with a bogus GOP impeachment. Bush II gave us Iraq War II, which Biden voted for along with other liberal interventionists and neo-cons. Under Obama, Sec of State Hillary deserves blame for mess in Libya, which was a functioning country prior to USA/NATO interventions. Trump, oddly enough, is a peace president, actually withdrawing American troops (e.g. from Germany and Afghanistan) and making peace with North Korea (he said in Rose Garden speech ignored by most media that we would be at war in North Korea now with other party in power). Big war and peace differences between candidates, and for some voters foreign policy is more important than capitalism vs socialism. Trump and Bernie Sanders aligned on foreign policy, which is why Sanders voters are not a lock for Biden. Election seems more about cultural issues, gig economy (Trump favors, Dems oppose), guns (Virginia). Economy, taxes, regulation, fossil fuels may not be voter focus, though important part of party baggage that will be hidden in cultural war. Wonder what Chairman Mao would have to say about USA Great Cultural War.
Taxes. When you start @15% corporate rate-among lowest in world-then you’ve no where left to go but up, progressive or not. I’d like to leave politics out focus on asset mgmt. during Biden Admin. From article, I’m hearing that commodities or other inflation hedges are in order. Most old-style ‘get it going again’ drives focus on gov’t spending on infrastructure. Much more difficult with a new 8 trillion or so of gov’t debt though. If commodity prices hyperinflate, I’d expect other prices to inflate and bond prices to steadily if (slowly) rise. So, again, where to put my money? Gun and bullet stocks normally perform quite well during a Democratic Admin.
Biden secured uncontested nomination and as other stock market catalysts wane, his ‘taxes and regulation’ catalysts will weigh. ‘Reopening’ narrative will bog down post-July as $600/mo. Unemployment stimulus ceases. GOP Senate will begin a watered-down package which will be met with derision by Democratic House. Maybe by end August will see passage of mini-bill just in time for a short-lived Labor Day rally. Big Question: will demand return to 100% post-COVID even after Phase X/Y/Z allows 33/50/100% capacity? Or will combo of fear and job/income loss continue to suppress demand?
Chart Rider profile picture
Why pay any taxes at all? The government can keep printing paper money.
Good analysis, but let us all remember that in the debates leading up to this upcoming election, the battle is for control of your mind. All the rest is just a side show on the way to 11/3/2020.

What wins out the present Capitalism or Socialism, that is really what we are deciding in five months. Those 14 million "young" voters 75% will probably vote Democratic, loured by the prospect of free stuff IE: education, medical, even possibly a job, they all all too eager to abdicate freedom to get that.

Running a federal surplus twenty-five years ago will mean nothing when these young workers are paying 50% income tax, to help the next generation get their "free stuff". Factor in higher productivity rates due to technology, meaning we need less people every year to produce more and many of these young people will still wind up in mommy's basement just like so many young people today. They just won't have as much debt, the tax payers will be holding that for them.

That's my angle !
imogen8 profile picture
With the Fed buying corporate bonds and ETF’s, how can we even pretend that we have capitalism or free markets anymore?

When the market owns the government, how is that any better than socialism?

I only wish that we had capitalism and free markets. We have cronyism and corporatism instead, regardless of who is in office.
DKB2 profile picture
Energy, taxes, and regulation will not be the upper most items occupying most minds come election time.
The election will be viewed as a referendum on President Trump's leadership or lack thereof.

Happy Trails...
2020 looks like a booby prize to me. Not going to be easy to keep playing the ponzi scheme for much longer. Someone in the next 4.5 years is going to be in the White House when the stuff finally hits the fan. If Republicans were smart they would thank Trump for the justices, abandon him now, and let Biden get the blame for whats coming. If Dems were smart they would let Trump get his 2nd term and take all the blame and come 2024 between anger and changing demographics, they would rule for generations.
@powercise - "if the Dems were smart...." that must be why they nominated Biden.
Agree! This bull market still has legs to run for a few more months. Then the election risks and Democrat control of government and their high taxes and stock market hostile policies will kick in and a sell off will happen before November. Get out before then. It's the best advice you'll get all day.
bobhorts profile picture
Are you only four years old? You seem to not have lived through the tremendous bull markets during the Pres. Clinton and Obama administrations. We also had budget surpluses during the final years of the Clinton administration and declining deficits during the Obama administration. I understand that facts may not matter to you, but most investors prefer fact over fantasy.
Please go review Bidens issue page. I just did. If you think that is bullish for the economy then I hope you have someone else managing your money.
bobhorts profile picture
Thank you for your objective analysis. Next time maybe you can address the facts in my post. Yes - I recall all of the brain washed telling others to beware of the market during the Clinton and Obama administrations with their tax increases, health care plans, etc. Sorry they missed out. Not wise to let your political bias affect your planning.
bbro profile picture
First....understand 2020 is not 2016....there will be 14 million new voters...mostly young
@bbro .... mostly young ........ and angry.

Only question: Will they finally vote. No idea but one can only hope they do.
kenodick profile picture
Maybe they will be too busy protesting against the right to vote. Most have just -sadly- soaked up the liberal doctrine of their educators.
"there will be 14 million new voters...mostly young"

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