There were tariff announcements during the Trump administration that appeared reactionary and resulted in unintended consequences on multiple occasions with emergency exceptions having to be made to protect large American employers such as Apple. 

Policies on both sides can elicit negative market reactions. If neither party has the power to completely have their way, the market sighs a breath of relief as any potential damage should be limited. 

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If there is any economic issue facing the country in which politics plays a major role, it’s the national debt. Throughout my 25 years managing money, I’ve had a lot of people raise concerns about the national debt. They would be panicking as we hit “all time highs” on the levels of debt our country was racking up. I explained at the time that the proper way to evaluate our debt position was in relation to the economy. After all, most of our retired clients paid more for their most recent automobile than they did their first home but their incomes are much higher as well. Inflation causes us to have to evaluate the debt issue in relative terms by using gross domestic product or GDP which measures the size of our economy. 

Our highest debt to GDP occurred during World War II at 120%. So as we hit all time dollar highs of 6 trillion, 10 trillion and 12 trillion, our debt to GDP was still well under 100%. That changed coming into 2024 as we approach 35 trillion in debt resulting in our debt to GDP crossing 120% for the first time since World War II. 

It can be said that we’ve been here before and worked our way out but there’s a HUGE difference between this time and last. As I mentioned in a previous newsletter, the last time we were here, there was no Medicare, no CIA, no Departments of Homeland Security or Education, no NASA. Even Social Security only covered a widow whose life expectancy was lower than the age they were allowed to first start collecting. Here we are 80 years later hitting 120% debt to GDP but unlike last time, we have 214 trillion dollars of unfunded liabilities and we’re giving away money we don’t have to people all around the world.  

It’s much more likely that our lack of fiscal responsibility will cause the death of America, not the next president. So don’t sweat the presidential election as it relates to the stock market but be concerned about fiscal responsibility down the ballot. 

The market tends to have ugly Octobers in presidential election years and then tends to rally very strong from the election into year end. The market has accomplished some things in recent weeks that indicate it is poised for a strong finish so unless things change, we would expect a similar path for the remainder of 2024. 

2025 is shaping up to be a different story as we see some economic developments and market action that we find concerning. We don’t expect anything dramatic but we’re not as convinced as many market pontificators that we’re going to have the coveted, elusive and extremely rare, “soft landing”.   

There’s a lot to talk about regarding next year but we’ll take a deep dive on those expectations with the next newsletter as we provide our 2025 outlook. Well, barring the end of America between now and December. 

Have a wonderful Thanksgiving and Christmas be sure to tune in to our weekly podcast or reach out if you have any questions or concerns in the meantime.