The elephant in the room

October 15, 2016 09:00 AM
One would be dishonest to present this year’s election as just a contest between an entrenched Democrat and a different kind of Republican: Status quo vs. change.

One would be dishonest to present this year’s election as just a contest between an entrenched Democrat and a different kind of Republican: Status quo vs. change. Donald Trump has said things that no other candidate for this office, at least in my lifetime, has said. Crossed lines, never crossed before. He has called for actions that constitute war crimes and encouraged physical violence at campaign events. For the most part, this has only added to his mystique among his most ardent supporters who are disgusted with both parties and forgive (or celebrate) his most outrageous comments as proof he is not politically correct. He will tell it like it is and not let facts stand in the way. All the while presenting very little in terms of actual policy. He is an all-star marketer and he is marketing his brand, and that brand is Trump. 

Trump, as any successful reality TV star must, has a great understanding of pop culture and trends. He knew where much of the GOP had moved before party leaders. When confronted with his objectionable comments and behavior he responds that he is not politically correct. It is almost like a “get out jail free” card. 

Political correctness exists (on both sides of the political spectrum, by the way) and has been an enemy of honest and important discourse. Anyone who is not a card-carrying member of the Eastern establishment  thought-police cringed at the image of Jeb Bush being grilled by a pack of reporters over his use of the term “anchor babies” during the primary season. Surely there were more pressing questions for Bush. 

Political correctness at its worst puts the feelings and sensitivities of certain groups ahead of truth and honesty. It focuses on words and not deeds, and places perception (based on one group’s norms) over reality.  However, being willing to refer to whole groups of people as rapists is simply a slur, not a lack of political correctness. It is not a matter of being politically correct to support the Geneva convention and military norms, or to reject the idea that you restrict immigration based on religion or to monitor citizens of one religion. Nor to support agreements and treaties we have signed with other nations. The next president carries the baggage of all the agreements past presidents and Congresses have made, he doesn’t get to wipe the entire slate clean and start all over with the ones he likes.

In our election preview (see “Bizarro world election,” page 16) we speak with several experts that breakdown the election from a markets point-of-view. Markets hate uncertainty, and the prevailing wisdom is that Trump represents greater uncertainty. But there are also sectors likely to perform better or worse due to the election outcome, or due to major changes in expectations. We tell you what they are. 

We joke that while pundits debate which candidate is lying (or lying more) market participants may be more worried about who is telling the truth. For Hillary Clinton it is whether she is the committed Wall Street insider she was accused of in the primary or the reformer willing to take on the big banks and tax traders (see  “Open (political) season on traders,” page 23). The hope regarding Trump is that he is a successful businessman and shrewd negotiator, with all the rest being just an amusing sideshow. The problem with that is there are questions on how he has run businesses. Presidents can’t declare bankruptcy or simply decide not to pay people. One thing for certain is that there is a large dissatisfaction with the status quo that has been playing out globally this year, which suggests that any potential outcome is possible. 

Arguably, currency markets may be the most affected by this year’s election. With both candidates opposing the Trans-Pacific Partnership and one threatening to tear up NAFTA and institute tariffs, global trade is a big issue. In fact, one currency, the Mexican peso, appears to be correlating to election polls (see “Breakout,” page 63).

The markets currently may be more interested in what Janet Yellen is likely to do, which is a problem. In “How we will vote in November,” (page 24), Features Editor Garrett Baldwin discusses how the Federal Reserve has been the driving force behind markets and the economy. But it has not been some machiavellian power grab that is responsilbe but an abdication by Congress. Gridlock has put the Fed in charge by default and the next President, whoever he or she is, along with Congress needs to reassert control and use fiscal policy to address our slow-growth economy.  

About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange.