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Election Angst Growing

11/3/2016
By Charles Payne, CEO & Principal Analyst

The race for the White House continues to become more competitive. Each time the blue and red lines move closer, the collective knot in investors' stomachs tightens. 

This is more about rocking the boat that often matters more to Wall Street, than the nuts and bolts of growing an economy and creating a sustainable organic foundation that could feed earnings for the long-term.

It’s not that Wall Street doesn’t like such a scenario but…

-Wall Street doesn’t think it’s possible

-If it is possible, it would take too long to make such a transition

-It would take away some of their power

The other major concern of a prolonged trade war or vendettas against individual U.S. companies is a legitimate worry.

I continue to say that we could win a trade war, but the stock market is driven by the bottom line and making Apple (AAPL) assemble smartphones in America would have a much more deleterious impact on earnings than a higher minimum wage.  In both cases, businesses should follow their own guidelines.  We can make it easy with lower taxes and far fewer regulations.

The Rise of Nationalism

I can feel it coming in the air tonight, oh Lord
And I've been waiting for this moment for all my life, oh Lord
Can you feel it coming in the air tonight, oh Lord, oh Lord

-Phil Collins

Well, the Federal Reserve met and sent a message to investors, stating that things are so great that they must move to hike interest rates in December. However, two members wanted to move right now, but  the committee pointed to inflation quickening, the Gross Domestic Product (GDP) gains, and a solid job growth.  So, these folks are just about ready to pull the trigger.

“The committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives.”

This kind of talk seems so disconnected from what Main Street is feeling. I am not just talking about in the United States, but it’s also apparent in most so-called advanced nations.  In fact, even the International Monetary Fund (IMF) has been warning about economies cooling, not heating up too fast.  There is no doubt this economic slump is a key driver in what’s happening in the political world.

The richest nations in the world have hit a brick wall and can’t get out of their economic funk.  And it’s not going to get better anytime soon.

Economic Projections

2016

2017

Advanced Nations

1.6%

1.8%

  • United States

1.6%

1.8%

  • Germany

1.7%

1.4%

  • France

1.3%

1.3%

  • Italy

0.8%

0.9%

  • Japan

0.5%

0.6%

  • United Kingdom

1.8%

1.1%

On the other hand, nations that were once the poorest have been on a tear and will continue to outpace the growth of advanced nations.

Economic Projections

2016

2017

Emerging/Developing Nations

4.2%

4.6%

  • China

7.6%

7.6%

  • India

4.8%

5.1%

  • Mexico

2.1%

2.3%

This situation has already played a role in the shocking British Exit vote, and it could change the political face of Europe in upcoming elections. This sweeping movement, also known as nationalism will cause some to recoil but it will give others hope for a better day.

Moreover, it would mean huge changes in economic and foreign policies that have closed borders that could impede global trade.  This scares Wall Street but we are going to trade with the rest of the world, and the best products are going to be in demand. Still, I must acknowledge the growing angst.

Charles Payne
Wall Street Strategies


 

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