Despite all that has gone on in the markets and economic data this week, I would be remiss if I didn’t address what is really on everyone’s mind: What does Joe Biden’s dropping out of the Presidential race mean for the markets? Anything? Nothing?
After all, we are swimming in completely unchartered waters with this turn of events.
Not surprisingly, our Investment Committee has an official position that it will not make concrete predictions until after the Democratic Convention. After all, Vice President Harris still has to go through the formal nomination process, and the official party platform is as yet unknown. Who knows for certain what will eventually come out of Chicago?
Further, I have long maintained that politicians get too much credit for the good times and too much blame for the bad.
There’s more.
I have a sneaky suspicion social issues are more important to the average American voter than macroeconomic and tax policies that don’t directly concern them. If this weren’t the case, marginal income tax rates for C corporations would be a much hotter campaign topic than it is. I mean, has that ever been the ultimate deciding factor in anyone’s vote? Even though this one issue has enormous ramifications on economic activity and wealth creation?
Or how about the capital gains tax… my least favorite tax of all? This is a pernicious beast which inhibits the free flow of capital in the financial system to its highest and best use. As such, it is nothing if not a capital control, which have proven to be an impediment to economic growth. Forget the overall economic benefits of unfettering capital. People either want to make sure phantom billionaires pay “their fair share” OR they want to eliminate them for personal reasons.
While I am on a roll, do you want to know a great way of disseminating wealth throughout society? I am talking about fail proof, 100% guaranteed success rate. Care to guess? How does completely eliminating the estate tax and multi-generation trusts strike you? Or taking an axe to what we used to call “spendthrift” and QTIP trusts? Family LLCs and trusts? Dynasty Trusts? Gone. The whole lot of them. When someone dies, their beneficiaries get their inheritance with absolutely no strings attached. None. Nada. Zip. I mean, there is absolutely no way to protect your estate from future descendants.
Care to guess how long that money would stay in the family? Here is the most likely scenario. Grandparents make the money. Their children don’t lose it, but their grandchildren do. Man, this would be great for the long-term health of the economy, wouldn’t it? Freeing up billions, even trillions, of dollars for heirs to spend as freely as they want? No trustees to say no? No documents which disallow certain purchases? Or limitations on the amount of money a beneficiary can spend?
Brother, having worked in and around the trust world my entire career, and having created a trust division of a bank, I can tell you this would, let’s call it, free up a lot of capital.
As I have already mentioned, freeing up cash to flow through the economy to its eventual highest and best use will engender economic activity.
Unfortunately, much like with the capital gains tax, people either want to make sure the phantom wealth pay “their fair share” OR they want to ensure their wealth lasts for generations upon generations.
All of this is to say, I will be extremely interested to see what is on the Democrat Party’s official platform when all is said and done in Chicago. Just what will be the social positions which strike a nerve with potential voters? Will the macroeconomic/tax policies be focused on economic growth or covered in social issue gift wrapping?
So, what are the things which will drive Americans to the polls? The issues which influence them to pull the lever or mark the box for one particular party? Or will hatred of the other party and its candidates be enough for most voters?
This has a point.
I dare say the upcoming Democrat Convention in Chicago is the most important major party convention since 1980.
- First, and foremost, the delegates who said they would vote for Kamala Harris need to follow through on their promise(s). However, they might find themselves wearing cement shoes if they don’t.
- Second, that the party’s 2024 platform will shift further to the left from 2020’s platform seems like a foregone conclusion. However, just how far left is unknown.
- Third, who will be the Vice President nominee? Will they fill a demographic or geographic gap in the ticket OR solidify the “base” as Trump has tried to do with Vance?
Whew. What I am about to type is my opinion only. It is NOT necessarily that of Oakworth Capital Bank or any of its shareholders/associates/directors and all of that other compliance jazz.
Kamala Harris will have a good chance of winning in November IF the party limits its official platform, and doesn’t try to address every perceived societal ill in the country. The more touchy issues it tries to tackle, the more people it could potentially alienate. KISS….keep it simple stupid.
If it can do that, it will have an excellent chance of winning in November IF the party chooses either Josh Shapiro or Mark Kelly to be the VEEP nominee. Shapiro is the current Governor of Pennsylvania, and is a relative moderate in the party. He could help deliver what has become a “swing state” without alienating moderate independents. Kelly is a U.S. Senator from Arizona, and really sort of a bad ass, having been a naval aviator and an astronaut. Frankly, although he might be a touch more liberal than Shapiro, his resume is a nightmare for the GOP.
On the flipside of the coin:
If the Democrats leave Chicago with an extremely far-reaching platform and a VEEP nominee who is either divisive or unknown, November is going to be a real struggle for them. The question then is: just how badly do they want to win? Because it is more probably doable than anyone thought possible this time last week.
With that said, we won’t make any concrete predictions until after the Democratic Convention. As you can tell from my comments, this is for good reason since this is the most important political convention in almost 5 decades.
Regardless, please remember what I have always said: politicians get too much credit for the good times and too much blame for the bad.
Have a great weekend.
Thank you for your continued support. As always, I hope this newsletter finds you and your family well. May your blessings outweigh your sorrows on this and every day. Also, please be sure to tune into our podcast, Trading Perspectives, which is available on every platform.
John Norris
Chief Economist
Please note, nothing in this newsletter should be considered or otherwise construed as an offer to buy or sell investment services or securities of any type. Any individual action you might take from reading this newsletter is at your own risk. My opinion, as well as those of our Investment Committee, is subject to change without notice. Finally, the opinions expressed herein are not necessarily those of the rest of the associates and/or shareholders of Oakworth Capital Bank or the official position of the company itself.