As the 2024 presidential circus rumbles into town, one burning question is sending shivers down Wall Street’s pinstriped spine: Will the stock market take a header off the metaphorical cliff if stalwart Joe Biden defies the doubters and reclaims the Oval Office for four more years of Democratic rule?
With “Sleepy Joe” emerging as his party’s presumptive nominee after a multi-ringmaster primary season, the bulls and bears are squaring off for an epic clash over the market’s future trajectory. The ursine crew is pounding the war drums over Biden’s policy agenda, while the bovine battalions are brandishing over a century of empirical data to bolster their bullish forecasts.
The Bear Pit: Policy Risks and Apocalyptic Omens
Let’s first hear the bear’s growling case against a Biden re-election. Top of the list is the president’s proposal to quadruple – you read that right, quad-ru-ple – the tax rate on corporate stock buybacks from a minuscule 1% to a whopping 4%.
Now, to the layperson on Main Street, that might sound like a minor hike. But for the corporate titans who went on an $800 billion buyback bender in 2023, gorging themselves on their own shares, it’s akin to choking on a plutonium-laced knuckle sandwich.
You see, these repurchase programs have become corporate America’s favored tactic for artificially inflating earnings per share numbers and keeping the Wall Street cool kids in a perpetual swoon. Crank up the buyback tax to Bidenesque levels, and you could be putting a serious dampener on that EPS party.
But the bear’s snarling doesn’t stop there. The Biden administration is also pushing to raise the corporate alternative minimum tax rate to 21% from 15% for firms hauling in over $1 billion in profits annually. As if that weren’t enough red meat for the ursine crew, the peak U.S. corporate income tax rate could be jacked up from 21% to a beefy 28% under a second Biden term.
On paper, these tax hike proposals look poised to put the squeeze on corporate coffers tighter than Chris Christie’s bathroom scales. With profits potentially taking a haircut, spending on innovation, hiring, and those beloved merger fiestas could be first on the chopping block. Hello, economic slowdown – the bear’s wet dream catalyst for a prolonged market rout.
But wait, there’s more grist for the bear’s ravenous maw. Several key economic indicators are flashing bright red warning signals that would make even the most hardened convoy of doomsday preppers sit up and take notice.
Take the ominously declining U.S. M2 money supply as a prime example. This broader measure of cash sloshing around the economy has plunged over 2% from its record highs – a phenomenon that’s only occurred four other times in the past 150 years. The last such instance? Why, none other than the Great Depression era itself.
Historically, when the M2 tide goes out like this, it’s been a harbinger of deflationary funk, soaring joblessness, and all-round economic pestilence. While we’re unlikely to see bread lines resurface given modern policymakers’ bag of tricks, the threat of consumers and businesses batting down the fiscal hatches looms larger than Dolly Parton’s…well, you know.
Other predictive tools like the Conference Board’s Leading Economic Index and the New York Fed’s recession probability gauge are also flashing luminous omens of potential turmoil ahead. Toss in some rampant inflation anxieties and you’ve got a veritable bear-a-palooza in the making, with or without Biden’s re-election.
The Bull’s Retort: A Century-Long Data Stampede
But hold on to your Wall Street Investing For Dummies books, because the bulls have a compelling counterpunch that could send the bears scurrying back to their caves: Over the past century-plus, the stock market has displayed an incredible ability to power through any political noise or economic zemblanity and enrich resilient investors along the way.
The data gurus at CFRA Research have crunched the numbers, and their conclusion is unequivocal: Since 1945, the S&P 500 has delivered juicier average annual returns under Democrat commanders-in-chief than their Republican counterparts. We’re talking an 11.2% yearly gain for the blues, compared to a relatively arid 6.9% for the reds over the same period.
The Bill Clinton and Barack Obama years exemplify this democratic devouring of market returns. Under Clinton’s watch from 1993 to 2001, the S&P 500 stampeded to a blistering 15.2% annualized gain. Obama kept the bull run going with a 13.8% yearly surge between 2009 and 2017. While past Republican regimes have seen their share of stock market festivities – Calvin Coolidge’s Roaring Twenties romp leaps to mind – the balance tips heavily in the Democratic campo’s favor over extended stretches.
But why stop at presidential terms? The real money shot for the bulls comes from a study by the mavens at Bespoke Investment Group. These nerds in the numbers shed empirical light on the stark divergence between bear market pounces (periods of sustained declines) and bull market stampedes (prolonged upswings) since the Great Depression’s opening bell in 1929.
Their findings? Bear plunges, while undoubtedly brutal, tend to be relatively short-lived affairs – lasting just 286 days or a puny 9.5 months before the animals have to throw in the towel. Bull runs, on the other hand, proved to be far more tenacious and iron-willed beasts, rampaging on for an average of 1,011 days – a whopping 3.5 times longer than their ursine rivals.
This pattern of fleeting pessimism yielding inexorably to long-lasting market optimism is ironclad proof of the stock market’s infinite ability to shake off troubles and forge boldly ahead, regardless of who’s planting their derriere in the Oval Office hot seat at any given time.
But the ultimate bull rallying cry comes from the deep data reservoirs of Crestmont Research. By reconstructing over 100 years’ worth of rolling 20-year investment periods from 1900 onwards, their analysts stumbled upon a revelation so profound, it would have left the Oracle of Delphi utterly gobsmacked.
Of the 105 unique 20-year windows examined, encompassing both Democratic and Republican presidencies, every single one managed to produce positive total returns for investors that included stock gains and dividends. Not one period, spanning multiple generational cycles, failed to enrich the stalwart and level-headed.
Even better, these gains were hardly measly affairs. Over half of those 20-year periods minted annualized total returns in the luscious 9% to 17.1% range – a performance that would leave any seasoned Wall Street pro drooling like Homer Simpson at an all-you-can-eat doughnut buffet.
For the bulls, this secular study is ironclad vindication of the stock market’s wealth-compounding prowess, regardless of which political party happens to be steering the ship from 1600 Pennsylvania Avenue. As long as America’s democratic capitalism and free market principles remain intact, they argue the market’s perpetual upward trajectory will ultimately continue enriching those disciplined enough to stay invested through any fleeting political or economic wildfire.
The Cage Match: Bulls vs. Bears
As the fighter jets of the rival Biden and Republican camps trade sonic booms overhead, Wall Street is bracing for a no-holds-barred slobberknocker between the baying bears and the stampeding bullish herd.
The bears have potent ammunition in their non-depleted Uzis – concerning policy proposals backed by worrying signals from economic soothsayers that could presage a gathering financial superstorm. If they’re right, not even the most supernatural of bull market rallies may be able to override the gravitational pull of a prolonged rout.
But the bulls counter with over a century’s worth of unimpeachable data validating the stock market’s phoenix-like ability to rise resurgent from even the most cataclysmic of thumping pile-drivers. For every beaten, battered bear market, they contend multiple bull market juggernauts have emerged, enriching those wise enough to stay committed through the showdowns.
Only time will determine which of these colossal market beasts reigns supreme in the aftermath of the 2024 electoral smokeshow. But one fundamental truth remains unshakable: For investors levelheaded enough to tune out the political noise and focus on the endless bigger picture, the stock market’s perpetual wealth-compounding engine could keep chugging merrily along, irrespective of whether a Democrat or Republican is commanding the White House.
