2021: Political Storms, Big Spending, Unpredictable Markets

Summary

• Political chaos in the US overhangs the markets.
• While the immediate storm has passed, the American political system seems fractured - so too the society itself.
• The Biden Administration will likely spend even more than the past three Administrations, all of which have spent handsomely.
• The markets look unpredictable to me, despite the optimism of most professional analysts.
• I will stay long, keeping my investing horizon in mind.

This has been a wild few months. I won't rehash the American political events. Everybody knows what has happened, and that the wounds are raw and real. Nor are they going away soon. The divides between the two political parties are as deep as I have ever seen them, and I see no evidence of 'healing.'

These differences reflect the society that elects the politicians. That is disturbing, objectively, no matter your politics. Centrists have no reason to be pleased. Conservatives should be dismayed, given that Democrats have massive power over two of the three branches of the US system. And Democrats, while perhaps pleased and relieved to be rid of President Trump, must be aware that the future is uncertain. How pleased can they be, once the dust from Trump's departure settles?

Enter President Biden and a free-spending Administration that is at least partly beholden to left-leaning Congresspersons and their constituents. The money will flow because of COVID relief and because it is a traditional Democrat role to increase public subsidies. Infrastructure rebuilding will be a priority. And attention to the base will color the Administration's economic outlook, and that cuts against restraint.

Against this wild background, the markets are continuing to push higher. The expectations of full economic activity if and when COVID ends (does it, ever?) are clearly driving market activity and stock returns. The majority of public-space Wall Street and market analysts sound bullish to me, though a number of bearish pieces have appeared recently on Seeking Alpha. All the arguments have been hashed and rehashed - low interest rates (though climbing), stimulus only increasing (pushed by the entrance of Joe Biden to the White House), increased economic efficiency brought about by computerisation, the intelligent use of software (especially by means of 'the Cloud') and the advantages (alleged) of a work at home reality.

I accept that all these trends are powerful and mostly real, though I question the long-term domination of the WFH model. But there are also Bearish indicators. The Bearish article writers on SA have laid these out better than I can. Open any of their pieces for a reminder of the perils.

What I think, given the deepening political malaise, is that a bizarre and enduring contradiction rules American life now and well into the future - good people working hard and treating each other fairly decently while an atmosphere of political hatred and two 'virtual' nations deepens. That this contradiction has been around for a while is now clear, if it was not before. That it can endure for more than 3-5 years without 'macro' societal disruption that affects the economy and markets? Of this I am not at all sure.

There is more to say, but I will leave it there. Good luck with investing, and life. I am tired of the nonsense, and want to shut it out.