Will There Be a Post-Election Recession

When the FBI announced on Friday that it will reopen the case involving Hillary Clinton’s email scandal due to new evidence that has emerged, the stock market initially took a downturn.  Does this mean that stock investors want Hillary Clinton to be elected president?

After the initial downturn, stocks did somewhat recover.  This could be a foreshadowing of what is to come.

Stock investors like certainty.  Uncertainty can lead to falling stock prices.  But if it isn’t justified, then stocks will inevitably turn back up.

I think Hillary Clinton is the safe choice for Wall Street, especially since Clinton has benefitted so much from Wall Street despite any rhetoric otherwise.

Donald Trump is a complete wildcard who is hated by the establishment.  He is the epitome of uncertainty.  In addition, he has been somewhat critical of the Fed, which could be bearish for stocks.

If Trump pulls off a stunner and wins, I think it will resemble Brexit quite a bit.  The polls suggested that the Brexit vote would fail.  When it actually passed, stocks fell, including outside of Great Britain.  But after the dust settled a bit, stocks recovered.

There are a lot of parallels between Trump in the U.S. and Brexit in the U.K.  Although one is an individual and one is something of a secessionist movement, they are similar in their messages.  And those supporting them are similar.

If Trump wins, I would not be at all surprised if stocks tumble.  And if there is a major overreaction by the markets, it will probably be a good short-term speculation to actually buy and watch stocks recover from the overreaction.

Almost immediately after Brexit passed, the Bank of England loosened its monetary policy.  If Trump wins, does that mean that the Federal Reserve will loosen its policy?

We really can’t be certain, but it would be hard to imagine Janet Yellen and company going out of their way to help out Trump with some short-term stimulus.  Although a tight monetary policy is what we need for the long run, it can also serve to expose the previous malinvestments.

If Hillary Clinton wins the election, maybe stocks will hold steady or even rally the next day.  But don’t expect it to last.  Half of the country thinks Clinton is a criminal who belongs in jail.  She could be the equivalent of a lame duck president on the day she takes office.

In terms of liberty, this is positive.  The less respect that people have for the president – especially her – the better it is for liberty.

I think the next president, whomever it is, is going to have to deal with a bad economy.  The national debt will soon be over $20 trillion and more baby boomers are collecting Medicare and Social Security with each passing day.  Meanwhile, the malinvestments from 6 years of so-called quantitative easing (2008-2014) are going to catch up with us and be exposed.

If we hit a deep recession, it is possible we could be better off with Hillary Clinton, who will have trouble passing the blame on to Bush and the Republicans.  Maybe she can try to blame the Republican Congress, but most Americans blame the president.

Most of the blame should go to the Fed, but Yellen is an Obama appointee.  Again, it will be hard for Hillary to pass the buck.

I don’t think a Clinton victory is inevitable at this point.  She has been badly damaged and there may be more to come out in the next week.  Either way, I think you should be financially prepared for the day after the election.

I don’t recommend being heavy in stocks right now anyway, except as part of the permanent portfolio.   But I especially wouldn’t want to be heavy in stocks on November 9, 2016.

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