November 2016 – Week 2 Edition

Stock Market Likely to Decline in 2017

The stock market traded down 800 points overnight, but the real stock market did not open until 9:30 am Wednesday morning.  It opened up slightly before turning down.  There may be some initial celebration of the Republican sweep, but America tends to be suspicious of new Presidents, especially Republicans replacing Democrats in the White House. When this happens, the market tends to decline significantly:

The “Almanac Investor” has studied the Presidential stock market cycle going back to 1833. In those 46 four-year cycles, the post-election year (like 2017 will be in this cycle) is the worst year of the four-year Presidential cycle.  Since 1833, the market has declined 24 times during the first year of the Presidential cycle. It has risen only 19 of 46 first Presidential years since 1833, with one year of no change.

The market tends to decline under a new President since the market likes to see predictability. A new President in the previously-out-of-favor Party tends to bring surprises.  But after a year or so, the market (and the voting public) realize that the President is not all-powerful.  When the public realizes he can’t fulfill all his grandiose election-year promises, reality returns and the run from stocks to gold accelerates.  Be prepared and buy some gold!  We will have some special post-election offers for you later this week.  Check out our website and watch for our emails.

We can’t forget that China and Russia will test America’s new President with some expansionary moves, some saber-rattling and land grabs.  There may be nuclear threats from North Korea, Pakistan or a revival of nuclear development in Iran.  ISIS will expand deeper into Syria and Iraq, and companies in China and Mexico, among others, won’t submit to threatened trade war without retaliation. The fun has just begun.

Gold Shot up $65 – then Down $50 Overnight

Gold peaked at $1,335 shortly after midnight (EST), when it appeared that Trump would certainly win, but then gold traded down to $1,300 overnight.  When the stock market opened “flat” instead of down, gold fell to $1,285 before rising to around $1,290 – basically, where it traded on Monday morning.

Overnight, gold and the stock market bet on greater chaos under President Trump, but the emergence of a Republican majority in the Senate and the House gave investors hope that the Republican majority can start to do the right thing on a number of fronts – including tax cuts, more favorable trade deals, cost-cutting, repealing and replacing Obamacare with 50 competing state-run systems, and more pro-growth economic policies, like cutting regulation, which will promote the start-up of more successful businesses.

However, the Trump camp is enjoying something like a pre-nuptial “honeymoon.”  He has yet to pick his key cabinet officers and advisors, presumably including some Democrats as a gesture of peace across the aisle.  He has yet to explain the practical way he intends to bring his programs into fruition.  If he makes some serious missteps, gold could rise once again to $1,350, then $1,400 and even $1,500 by early 2017.

Gold’s Roller Coaster Ride

Gold rode a roller coaster based on expected election results.  Last week, gold rose above $1,300 per ounce after the FBI re-opened the case against Hillary Clinton, but when the FBI backed off from that challenge on Sunday, gold immediately fell under $1,290, then dropped to $1,270 early Tuesday, when most pundits expected Hillary Clinton to win by at least three million popular votes and 50 electoral college votes.  Then, as the Trump bandwagon gained momentum Tuesday evening, gold rose from $1,270 at 8:00 pm to $1,320 at 10:30 pm, before peaking at $1,335 shortly after midnight (EST).

I Join Jenna Bush at a Benefit for the YWCA

Speaking of President George W. Bush, I attended a Gala fundraiser for the YWCA at the MCM Eleganté Hotel and Conference Center last Friday evening. The main speaker was a gregarious Jenna Bush Hager, a teacher and the younger twin daughter of President George and Laura Bush. She is also contributing correspondent to NBC’s Today Show, an editor-at-large for Southern Living Magazine, founder of The Novo Project and chair for UNICEF’s Next Generation. In that capacity, she interned for UNICEF in Panama during her father’s second term.

YWCA’s mission is “to eliminate racism, empower women, stand for social justice, help families and strengthen communities.”   In that spirit, I was one of three sponsors given time to comment and ask questions, so I brought up supporting reading programs for disadvantaged children.  Later on I brought up the work our company has done to bring a woman’s face back to U.S. paper money, resulting in the recent addition of abolitionist Harriet Tubman to replace Andrew Jackson on the front of the $20 bill.  The last time a woman was featured on a paper note was in 1896, when the first First Lady, Martha Washington, was featured on the $1 silver certificate.

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