The Deep Woods: Political Pugilism and Markets

You are receiving this email because you signed up to receive our free e-letter The Deep Woods, or you purchased a product or service from its publisher, Eagle Financial Publications. [The Deep Woods] [Successful Investing]( [Bullseye Stock Trader]( [About Jim]( In This Issue: • Political Pugilism and the Markets • ETF Talk: The ‘Interest-ing’ World of Regional Banking ETFs • AMA Childless Cat Ladies Edition • America’s Abundance Political Pugilism and Markets by Jim Woods Editor, [Successful Investing]( and [Bullseye Stock Trader]( 08/07/2024 Sponsored Content [This New Idea is Set to Shock the World]( It seems that everything Elon Musk has done throughout his career sounded insane at first... Which is why it's important that you pay attention to his latest, strange invention. It's an AI device that could be the most powerful technology ever created. This new idea is set to shock the world once again - and this time, you don't want to be a nonbeliever. [Click here to learn all the details.]( “There are many men of principle in both parties in America, but there is no party of principle.” --Alexis de Tocqueville At this year’s [FreedomFest](, I had the privilege of being on a panel with my esteemed colleagues Dr. Mark Skousen, George Gilder and Roger Michalski. This was a Q&A panel, and the ostensible subject was how would markets perform for the remainder of the year. Now, one of the questions we wanted to address, but didn’t get a chance to, is what impact the presidential election would likely have on markets. In retrospect, I am glad we didn’t get to that question, because shortly after our panel we learned of the assassination attempt on former President Trump. Then, just one week later, in a dramatic twisting of the tale, President Biden decided to remove himself from the race (more accurately, he was forced out by Democratic elites). In the immediate aftermath of President Biden’s announced withdrawal, Vice President Kamala Harris was essentially anointed by the party to be its next forebearer, and I must say that from a strictly objective, non-partisan perspective, she has done so expertly. The race has definitely taken on a new tone since VP Harris acquired the reins, and according to the latest polling, the contest is now extremely close, with both candidates eyeing paths to an electoral college win. As of this morning, the [polling data website 538]( (the best in the business, in my view) has the average of all the national polls showing Harris at 45.2% while Trump is at 43.4%. That’s about as thin a margin as it gets, and I suspect that margin will shrink the closer we get to Election Day. So, what impact (if any) will the current political pugilism have on the stock market? Well, that’s the real question, isn’t it? I mean, A) It’s your money that matters most, which is why you read my work; and B) The market is a forward-looking discounting mechanism that will react in kind to the various policy and regulatory proposals emanating from Washington. To answer this question, I am going to elicit the help of my friends at Sevens Report Research, who recently dug up some interesting data on the markets over the past nearly eight years, and through most of the last two administrations. A look at how markets performed during the Trump administration versus the Biden administration will provide us with some kind of baseline when assessing what might take place in markets if Trump is re-elected or if Harris wins the presidency. The one caveat here when assessing the following data is that during the Trump administration, we had the COVID-19 pandemic and the economic response to it. That response, which included a flood of easy money from both the Federal Reserve and the Treasury, skewed market results (to the upside) in 2020. So, how did the major market segments perform last time during each respective administration? The table below tells us just that. As you can see, from January 20, 2017, when President Trump took office through January 20, 2021, all but two of the above S&P 500 sectors show a distinct advantage in favor of Trump over Biden. Now, if we back out the skewed performance in markets during the COVID-19 pandemic, then we still get a decided outperformance for Trump versus Biden, although as you can see in the far-right column of our table, that outperformance is not nearly to the same degree as it was when you include the pandemic period (remember that despite the pandemic, markets enjoyed a stellar 2020). One very interesting thing to note here is that when it comes to the performance of the broad domestic equity market, as measured by the SPDR S&P 500 ETF (SPY), we see a virtual tie in performance over the periods that don’t include COVID-19. So, Trump outpaced Biden by 50.74% to 49.59%. Here again, this is about as close as it gets (and hey, it’s even closer than the current tight gap between candidates in the latest national polls!). The bottom line here is that based on the history of past performance, Trump is likely to be better for equity markets than Harris. However, keep in mind that Harris won’t have the same policy agenda as Biden, and Trump 2.0 isn’t likely to have the exact same policies as he did in his first term. One additional thing to think about here is that if you are looking to take advantage of short-term winners and/or losers from this election, consider that this presidential contest is likely to be the most expensive ever in terms of candidate and Political Action Committee (PAC) spending on advertising. This is especially true if you happen to be in a “swing state” where the contest is extremely tight, and where the winning of electoral votes will, in fact, decide the election outcome. According to a report by research firm eMarketer, total political ad spending in the country this year is expected to rise about 27% from the election year of 2020 to $12.15 billion. That’s a whole lot of money shuttled into the coffers of media giants. One media giant likely to benefit mightily from this big political spend is Fox Corporation (FOXA), as both candidates advertise on the network to boost their respective profile and to take their case directly to the people. If you’d like to find out more about how my subscribers are positioned for this big political ad spending, please [check out my High Velocity Options advisory service]( today. [China’s Global Conspiracy to Destroy the American Dollar]( China is nearing the end of its 40-year plan to dominate the world’s economy. Only one obstacle remains: The U.S. dollar. But not for long... because China has enlisted many co-conspirators to sink the dollar: Russia, India, Brazil, Argentina, Germany, and even Canada. And – no surprise – the International Monetary Fund (IMF) wants to jump in to help China win. This means China now has the power to crush the dollar almost overnight... and bankrupt America. But there’s still time to protect the money and retirement of investors. [Click here now to find out how... before it’s too late.]( ETF Talk: The ‘Interest-ing’ World of Regional Banking ETFs If there ever was a market sector that can be described as “rising from ruins,” it is the banking sector. Even after suffering a crushing blow in 2008 due to the subprime mortgage crisis that wiped out many giants in the sector and brought other bank CEOs to their knees, begging Congress for a bailout, the financial sector still contains some of the largest and most important companies in the world. But we’re not interested in those that are “too big to fail” here. Instead, we’re interested in the regional banking sector, as demonstrated by the exchange-traded fund (ETF) SPDR S&P Regional Banking ETF (NYSEARCA: KRE). These were also in the [news]( recently, as some of them reported stability issues, largely due to rising interest rates and economic problems, culminating in the collapse of First Republic Bank, Silicon Valley Bank and Signature Bank in 2023. Thankfully, those days seem to be behind us, and with interest rate cuts on the horizon, some investors are returning to these smaller banks. For those who are subscribers to my newsletter, [Successful Investing]( (and if you aren’t, why aren’t you?), you might already know about this ETF, as it is in our portfolio. For others, KRE seeks to generate results that approximate, as much as possible, the S&P Regional Banks Select Industry Index. The fund’s managers use a modified equal-weight index, which allows the fund to add banks of all capitalizations to its basket. Some of the companies whose stocks are in its portfolio include: Columbia Banking System Inc. (NASDAQ: COLB), Western Alliance Bancorp (NYSE: WAL), Valley National Bancorp (NASDAQ: VLY), Truist Financial Corp. (NYSE: TFC), Citizens Financial Group (NYSE: CFG), Zions Bancorp NA (NASDAQ: ZION), M + T Bank Corp. (NYSE: MTB), Synovus Financial Corp. (NYSE: SNV) and East West Bancorp Inc. (NASDAQ: EWBC). As of August 6, KRE has been up 9.45% over the past month and up 5.72% for the past three months. It is currently up 1.71% year to date. Chart courtesy of [www.stockcharts.com.]( The fund has amassed $3.11 billion in assets under management and has an expense ratio of 0.35%. Overall, the KRE ETF may be a good choice for investors looking for exposure to regional banks, but it's important to carefully consider the risks and potential returns before making any investment decisions. As always, I’m happy to answer any of your questions about ETFs, so do not hesitate to [email me](mailto:askjim@successfuletfinvesting.com). You may see your question answered in a future ETF Talk. [How to know what to trade.]( With thousands of stocks in the market… How do you know which ones to trade? You may not believe this, but… You can ignore almost all of them, because when it comes to stock and options trading... This is [something valuable]( that tells you the few stocks that you really should be looking at. Your whole search and strategy can take less than 15 minutes. Which leaves plenty of time to do the other things you want to do during your day. If you want to learn more - this free live class will show you how. [Save Your Seat Here.]( In case you missed it… AMA Childless Cat Ladies Edition There’s been a whole lot of political, social and financial goings-on over the past several weeks, and I’ve been fielding a lot of questions about it all from friends, family and particularly from you, The Deep Woods army. Fortunately, I have this platform to make my thoughts public, and I cherish that opportunity and I shall always treat it with the reverence it demands. Given the various questions and issues on your minds, I thought I would do another “Ask Me Anything” or “AMA,” and this time we’ll call it the “Childless Cat Ladies Edition.” So, let’s begin, as logic dictates, with our first question. My friend Charles R. offered me the following comment and question: “Jim, what did you think of J.D. Vance’s comments on ‘childless cat ladies?’ Aren’t you one of those childless cat ladies, too? LOL.” Charles R. is a long-time friend of mine, and he’s one of those “intellectual brothers from another mother” that, if you are fortunate enough to find, really add value to your life. And as best friends for nearly four decades, we make each other laugh with our observations on the world. So, I knew exactly what he meant by “aren’t you one of those childless cat ladies, too.” I mean, after all, I am childless, and I do have many cats. And while I identify proudly as a cisgender male that exudes “toxic masculinity,” I also have about a dozen barn felines on my ranch in Southern California, and I do love them all like one of those “cat ladies.” Now, in case you haven’t heard the J.D. Vance comments referred to here, they come from a [2021 interview with Fox News]( that’s been plastered all over airwaves by the mainstream media, in which Sen. Vance said the nation was run by “childless cat ladies” who are “miserable.” [Courtesy of Shutterstock.com.]( Sen. Vance’s deeper point here was actually a defense of marriage and traditional family, and I take it as such. And that defense is fair enough. However, what Vance has said about people who don’t choose to have children is rather outrageously stupid. It’s also politically moronic. I say that because Americans, childless or not, are ends in themselves. Each person is an individual first, and not merely some member of a tribe, or clan or even a family. As an individual, you have a stake in the current and future success of your country. Just because Vance has chosen to bring children into the world doesn’t mean those that haven’t made the same choice have any less of a stake than he does. In fact, it’s quite an insult to individualism to make that claim, and as a defender of individualism, I couldn’t disagree with the Senator more on this issue. Unfortunately, Sen. Vance added insult to injury with his comments, saying that childless Americans ought to pay higher taxes than those who have kids. “If you’re making $100,000 [or] $400,000 a year, and you’ve got three kids, you should pay a different, lower tax rate than if you’re making the same amount of money and you don’t have kids,” Vance said during an interview with conservative activist and podcaster Charlie Kirk. Yet, as [my friends at Reason.com point out](… “…childless Americans actually do pay higher taxes than most of those who reproduce. That was true in 2021, and it is true today. That’s because of the child tax credit, which has existed since 1997 and has been partially refundable since 2001. For each dependent that can be claimed, a tax filer gets up to $2,000 credit -- with up to $1,400 of that total being refundable, meaning that it gets paid out even if the filer doesn’t owe any taxes. As part of the tax reform package passed by Republicans during the Trump administration, the child tax credit [was doubled]( from $1,000 per kid to the current level.” So, you see, Sen. Vance doesn’t even have his facts straight here, and I think it behooves him to do so if he wants to be a heartbeat away from being the leader of the free world. Yet the wider, more important point, is that far from respecting the individual here, Sen. Vance wants to socially engineer the country with tax policy that punishes individuals for their choices. That’s not conservative, nor free market, nor freedom loving -- it’s just another example of big government imposing its will on citizens -- which is not okay no matter who does it. Craig S. writes: “Jim, is it time to exit technology and communications services stocks here? There’s been a big correction in the space, and I am struggling with what to do with my tech and AI-related holdings. I also own CrowdStrike. Any advice here?” Craig S., also a long-time personal friend and subscriber, poses a great question here. You see, for most of the past 18 months, stocks in the “Magnificent Seven” have been the biggest winners in the market, and they’ve helped propel the broader S&P 500 to new, all-time highs. Yet in July, there’s been a repricing of the tech giants, as their valuations and momentum definitely got over their collective skis, and hence we saw a pullback. Yet, when it comes to companies in the “Magnificent Seven,” the fundamentals remain robust, and largely intact. That’s particularly true of Alphabet, Meta Platforms and Nvidia, which continue to dominate their respective spaces. So, if you are playing the “long game,” I would not abandon these earnings powerhouses. I am certainly staying long in each within my own personal portfolio. That said, if you have robust gains in these stocks and you want to make sure you protect them, there is nothing wrong with peeling off some profits and keeping that money in reserve and ready to redeploy to new opportunities. As for CrowdStrike, by now the whole world knows what happened with their disastrous quality control issues in releasing a defective software update that nearly crippled the global economy. Yet, ask yourself this: Why did one corrupted update cause such a big snafu throughout the globe? The reason is because so many people use CrowdStrike’s cybersecurity software. For me, the ubiquity and widespread reliance on CrowdStrike’s products confirms that it’s the best company to own in the space. And once the news of the mistake subsides, and once CrowdStrike gets past any short-term financial impacts to its bottom line from the incident, it will be back to big moves higher in terms of earnings-per-share (EPS) growth and for the share price. So, my advice is to stay long CrowdStrike. Ken C. writes: “Jim, I saw you judging the ‘Pitch Tank’ at FreedomFest this year. You looked like you were having a blast. What was that like, and did you enjoy it as much as you seemed to be?” Ken, thanks for the kind words and the accurate observation as to the visible fun I was having judging the Pitch Tank. I’ve always wanted to be one of the “sharks” on one of my favorite TV shows, “Shark Tank,” so doing the live version at FreedomFest was a true joy. Not only were the pitches very well done and very interesting, but I also identified a couple of companies that I think have investable potential (at least from a venture capitalist perspective). The experience was so enjoyable, in fact, that I’ve already agreed to be a judge again at next year’s conference, which, incidentally, will take place earlier than usual next year, from June 11-14, 2025, in Palm Springs, California. [Click here for your chance to get a special early bird discount on registration](. Finally, before I leave the subject of FreedomFest and the Pitch Tank, I want to personally and publicly thank my friend and colleague, [Dr. Paul Wendee](, for asking me to be a part of the judging. A true Renaissance Man, Dr. Wendee is an entrepreneur, venture capitalist, newsletter writer, professor, martial arts expert (he’s a Fourth Dan (4th degree black belt) Shotokan karate practitioner) and, like me, a fan of James Bond and very fast British sports cars. In fact, last night, I had the privilege of guest lecturing to Dr. Wendee’s MBA class, and it was something that I truly enjoyed. So, here publicly, I want to say, “Thank you, Paul!” ***************************************************************** On America’s Abundance “America’s abundance was created not by public sacrifices to ‘the common good,’ but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes.” --Ayn Rand This political season, as in every political season, we’re going to be bombarded by chatter from both parties about how to “fix” the country. One side is going to hit you with the bromide that if we can just “come together,” we can save democracy. The other side is going to tell you that they are the only ones who can make the country great again. To this I say… Don’t believe the hype! No politician ever made the country great and no amount of coming together has ever contributed to America’s abundance. It is only the productive genius of free men pursuing personal interests and private fortunes that can ever, and that will ever, keep our country great. You see, [men go crazy in congregations… they only get better one by one](. Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. [Click here](mailto:askjim@successfuletfinvesting.com) to ask Jim. In the name of the best within us, [Jim Woods] Jim Woods Editor, Successful Investing & Bullseye Stock Trader About Jim Woods: [Jim Woods]Jim Woods has more than 25 years experience in the markets, as a stock broker, hedge fund money manager, author, speaker and independent analyst. Today Jim serves as editor and investment director of the long-running newsletters [Successful Investing](, [Bullseye Stock Trader]( and a new Live Coaching service offered exclusively to his readers. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, and many others. About Us: Eagle Financial Publications is located in Washington, D.C. – only a few blocks from the Capitol. Our products have been helping investors build their wealth for several decades. Whether you’re a long-term investor or short-term trader, you’ll find the right strategy for you, including how to earn more steady income to spend now, preserve and grow your capital to enjoy later, and whatever other investment goals you have. 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