Dear Friends and Clients,
Greetings. Well, we have been living in interesting times. The struggle with COVID-19 has had many of us reanalyzing our lives since we have been stuck home more than usual and adapting our living patterns to fighting off a pandemic. Right now, numbers are spiking again for COVID cases here in the States and we have lost 200,000 lives to this virus. Europe is also seeing spikes and it looks like a second wave is upon us throughout the world. Our First Lady, Melania Trump’s country of origin, Slovenia, and where my Godmother lives, is shutting down all its schools. There is fear in the U.S. that something similar may happen. So, we need to continue to wash our hands, wear our masks and when possible, stay home. As the renowned infectious disease doctor, Dr. Anthony Fauci, has explained to us often, we are months if not still a year away from getting full control over this virus. As people have complained to me this past year about how horrible everything is claiming, often, that this is the worse place they have ever seen America in, I have put on my historical hat and listened to them carefully. I have often heard the following:
- That staying home is killing our economy
- This election year is horrible and we probably will not have a President for months due to both Parties disputing the results, just like the Florida mess in 2000 with Gore and Bush, only worse.
- That racial tensions are the worse they have ever seen
- Our political leaders are sub-standard, on both sides of the isle
- We are slipping into Socialism
- That if Trump gets elected or if Biden gets elected, “I am leaving this country.”
Well, let’s analyze some of these phrases/opinions.
A). Our economy, although we had a pullback back in March due to the COVID, has rebounded and is at some of the highest levels it has ever been. Yes, the entertainment, hotel and restaurant businesses have been hit hard, but home sales and construction are booming and Wall Street, in general, seems to be doing extremely well. Yes, it will be better for all once a solid vaccine is out there for us and we can get back to “normal” life, but in general, as far as pandemics are concerned, we are doing well with it. When one looks at the Spanish Flu epidemic of 1918-1919 (see John Barry’s book The Great Influenza for an excellent history of this event), one sees we, as a collective humanity, are doing better than back then (the Spanish Flu killed 50 million people!). Moreover, when one studies other pandemics, like the Black Death of Medieval Europe (1346-1353 A.D.) that killed at least 70 million or the plague that affected Athens during the Age of Pericles (430 B.C.) where a quarter of the population died (100,000 deaths), we are doing better than most other societies throughout history. So the march of mankind, so to speak, is going forward although we definitely need to do better.
I just returned from spending time in Germany and Denmark. Observing how these countries handling the pandemic, the United States needs to do better and we could learn from their examples. Their infection rates and deaths are much lower than in America. Saying all this, we in America are adapting and getting back to work. Also, our teachers are working hard to help our children during these trying times, and we need to support and thank them.
Even though we are dealing with our new reality, often with difficulty, it seems the market has responded well to our new reality and, with the government stimulus plans, our economy is remaining rather healthy when all things are considered. We probably have to have a few more infusions of cash again into the economy and help for certain industries, like the airlines, but our government is working hard to do the right thing and has already demonstrated it is helping where it can. Few nations in the world have done and will do what America has been accomplishing to stop the bleeding economically. As a result, our markets should stay rather healthy although we probably will see some volatility if a change of government happens here in the U.S. and if there is another shutdown.
B). People are worried about this election year and describe current events as if they were reading everything through the lens of the book of Revelation with the powers of good and evil fighting each other. In other words, the fate of our country is in the balance and whoever gets into the Oval Office will save our country from ruin. You hear this from both Republicans and Democrats. Well, from a market perspective, I like to remind people of the following fact, which as an academic, I must honestly admit, I find surprising. Historically speaking, the stock market returns 11% under Democratic presidents and 7.8% under Republican presidents looking at the years from 1977 to the present. So, if you are a business-oriented person, you would want a Democrat in office although it appears that Republicans continue to tout that their Party is more friendly to business. And when people get hyperbolic about the destruction of our country and that either Biden or Trump will lead us down a road of sociological and economic destruction, I remind people that we have had worse times. We had the British invading our country and burning down our capital in 1812 when both our political and military leadership were failing us. At one time, we had a country that ripped itself in two, literally, from 1861 to 1865 during our Civil War. During this conflict, 618,000 men died killing each other over their visions of what type of government and society they wanted on American soil. We Americans, in other words, have had it much worse than what people believe today. The conflict we see politically stands in a long line of conflict that America has often had throughout its history whether it be the Trump/Biden or Reagan/Carter or Lincoln/McClellan or Lincoln/Douglas debates and election battles. We will survive whatever happens in November and continue to be strong because that was how our democracy was designed—it was designed to have conflict because our Founding Fathers knew that only through conflict, debate and airing opposing views, will a country not turn into a dictatorship or totalitarian monarchy.
Returning to the election, many people wonder what the government will look like if Biden wins. Some pundits say not only will Biden win, but the Democrats will also dominate in the Congress and Senate. If that happens, you will see Obama-Care remain in force and the committee for the 25th Amendment probably get passed that Speaker of the House, Nancy Pelosi, has been promoting. Moreover, many of the tax increases the Democrats want will probably get passed, especially the one on corporations. If, on the other hand, Trump gets re-elected, there is a strong chance he will not carry the Senate or Congress, and if this happens, he will have difficulty repealing Obama-Care, which he detests, and implementing some of his programs that are not yet finished like building a wall between Mexico and the United States. In past elections, I had a pretty good feeling from studying the polls of who was going to win, but this year, I have no strong feeling either way. Last time, I was convinced that Hillary was going to win and we all, with great surprised, saw what happened. American politics is nothing if it isn’t interesting and, quite often, shocking.
C). People are up in arms about the racial tensions in the United States. While I, as a Holocaust and Human Rights historian, do not want to trivialize the need for improvement in our society of making people realize we are part of one race, the human race, I also want to remind people that we have had it far worse than what is going on now. During the Civil War, we had White people slaughtering each other over ideas about how to organize themselves within a democracy and society. Brothers, cousins and fellow Americans were slaughtering each other over ideas and geographical affiliations. Caucasians were slaughtering other Caucasians. Most Southerners, although benefiting GREATLY from the slave economy, did not own slaves and they were just fighting for their states and home towns (they were not fighting to own slaves). Likewise, most Northerners did not fight to free the slaves and were just serving because they were drafted and/or because they wanted to help preserve the Union. History is never Black or White, but a lot of gray. Although people have died and are dying throughout the United States because of racial tensions, it doesn’t even come close to comparing to the hatred, death and destruction that happened due to nationalistic and sociological convictions we witnessed people have during the Civil War. So, although we have problems now, let’s not get hyperbolic saying this is the worse we have ever seen it in the United States or that we are incapable of solving the problems. We won the peace during the Civil War, preserved the Union and abolished slavery. It was a painful, terrible way of solving some of the nations’ problems of the time, but we as Americans did so and we will solve our current problems and do so together.
D). When studying our leaders of the past, like Thomas Jefferson, George Washington, Abraham Lincoln, Franklin Delano Roosevelt, John F. Kennedy and Ronald Reagan, just to name a few, I do agree with people on both sides of the isle that Trump and Biden both do not represent the best or the brightest in America currently or compared to some of the great leaders we have had in the past. Although Americans throughout time have derided their political opponents, the phraseology and terminology used for President Trump and Vice President Biden seem very extreme. People who hate Trump call him a liar, dictator, sociopath, uneducated, idiot, rapist, misogynist and a racist. People who hate Biden call him old, decrepit, stupid, demented, frail, unaccomplished, a socialist and uninformed. Well, America, these are the men we have to choose from. People who love Trump call him a true American, strong, patriotic, hard-working, tough, business-focused and truthful. People who love Biden say he is experienced, honest, balanced, respected, kind, presidential and diplomatic. In the end, both Trump and Biden are Americans and they both are doing their best to serve our country and implement policies they feel will be best for all Americans. You can argue with their beliefs and visions, but you cannot argue that they are not both dedicated to trying to make the United States, in their own ways, a stronger country. In the end, we must never forget what French diplomat and philosopher (and close observer of the French Revolution) Joseph de Maistre (1753-1821) wisely said, “Every nation gets the government it deserves (Toute nation a le gouvernement qu’elle mérite).” Whomever wins the Presidency this fall, America will continue its great experiment of democracy and will continue to be one of the strongest nations of all times.
E). The fear that we are slipping into socialism is somewhat verified by some of Bernie Sanders’ policies he would like to see America implement, but when one sees socialism in action like we did with East Germany or the Soviet Union, or like we are seeing with current Communist China or North Korea, we are far from the socialism we should be fearful of and fight against. Although Communism and Socialism are very different, often people bring them up in the same breath, so I have brought out some world examples to illustrate that we are very far removed from becoming a Communist state that usually arises through violence and maintains itself through fear and oppression. Now socialism is a different way of governance, and although our government allows for some socialistic programs like Social Security, it is also far away from becoming a Socialistic one. Some point to the socialism of Sweden or Norway or Germany (like with the SPD) as examples of what some democracies have become that would not foster here a good American way of life. Those people against these types of socialisms say it corrupts the capitalistic drive in people and takes wealth away from those who deserve it—the successful and hardworking people of society (lawyers, doctors, businessmen, etc.). There might be some truth to this statement, but America is very different from these countries. In the end, I do not think America is close to falling into a Socialistic way of government and as long as we have a democracy that has two or more parties fighting with each other, Socialistic mandates will not become universal in America. There might be a lot of policies Sanders and people of his bent might want that can be termed socialistic, but even if he was in power to push through such reforms, he would still need the American government to pass his reforms in order to make them law and legitimate, and that process is very un-socialistic. However, when one studies Biden and what he did with Obama, he doesn’t seem socialistic in the least and he has disavowed implementing anything that even remotely resembles socialism.
F). Many people have voiced that they are leaving this country if Trump or Biden gets elected. Although I can understand how these people are feeling, when one truly reflects on American democracy and society, such a response of leaving it if one doesn’t get his or her desired President is neither mature nor a helpful one. If people are disgusted with the leader of America, whomever he or she be, then it is up to them to try to work for the type of leader we should have in their minds. If they think we need someone else in the White House because he or she is a better leader, then they need to work towards that goal instead of being sorry losers and quitting the American democracy and going to another country. And if they leave, what country is better than the United States? What country doesn’t also have problems with its government and society? Is there a Utopia out there we can all go to when we don’t get our way with our elections? In the end, we Americans will get the government we work for and support.
When looking at everything we are currently faced with in America, I like to quote the half-American, English Statesman, Winston Churchill, when he said, “Americans will always do the right thing – after exhausting all the alternatives.” Even though there are many stresses out there in society right now and people are struggling with where their lives should go, politically, economically and sociologically, we are still living in one of the best times humans have ever seen. Most of us have plenty of food, our teeth, medical care, a home, a car and a stable government. There is much to be thankful for and less to complain about.
In looking at our stock market with all these thoughts in mind, it appears that Wall Street likes President Trump and, if he gets re-elected, we should continue to see economic growth continue. However, Trump is underperforming Obama and Clinton, so if Biden gets elected, we might see stronger returns. Trump is currently at 38.4% growth during his presidency compared to Obama who was at 71.7% and Clinton who was at 111.1% growth. Now, Obama and Clinton had two terms, but if Trump’s average is taken into consideration for his first four years, he would be tracking along the level of Obama and underperforming of where President Clinton was. From the indicators I have been following, like Bloomberg and researchers at Vanguard and Goldman Sachs, if Trump gets re-elected, the market should continue to grow and probably take off once he takes the oath of office. If Biden gets elected, then the market will probably have a correction and there will be uncertainty for a few months. However, historically, a presidency by Biden should show stronger returns overall since, as mentioned before, Democratic Presidents, in general, have better performing markets since 1977.
The next twelve months are going to be an interesting time for all of us. We will see during this coming year an interesting political evolution with whomever gets into office and we will see a vaccine for COVID. When the vaccine is distributed amongst the population, you better believe that the stock market, most likely, will take off regardless of who is in office. Also if Biden gets in, there is the thought he will be able to raise the corporate tax level from 15% to 28%. If this happens, you might see companies once again looking for ways to move their infrastructure offshore to benefit from better tax structures. Also, many have asked about energy and whether oil and gas are still areas to explore. Well, I have been touting energy investments for the past ten years, but they have basically flat-lined. Right now, barrel of oil is around $40 and many analysts say it should be around $70, but they have been saying this for a long time. Gasoline is not going anywhere anytime soon, but other analysts say that oil companies will continue to suffer this next year as fewer people are driving because of the COVID. And even when the COVID situation is behind us, we will see fewer people returning to the roads since they will be working from home. This trend is happening globally and not just here in the United States. So, the energy market is a strange one to look at and in some respects, it is trading at historical lows, and those lows may be around longer than people’s patience can handle. And as people ask me where I think good opportunities are then, I tell them I continue to read excellent reports about getting involved with companies that support and that deal with online shopping. That seems to be the biggest area of growth according to some investors.
In the end, if you have any questions about where you think you should be invested, please feel free to contact me anytime. We Americans need to feel that our country will continue with a strong military, strong government and strong economy because history tells us so far that this will indeed happen. Some of these realms may not be where we want them to be, but then it is ultimately up to us to get them to where we want them to be. As former chancellor of Yeshiva University, Rabbi Norman Lamm, stated, “Small minds blame others. Big minds blame themselves and then improve themselves.”