Friday Dec 13, 2024
Throw the Bums Out
Rarely have the rich world’s political leaders been so widely disliked. No leader of an industrialized country other than tiny Switzerland has a positive rating, according to a survey of some 25 democracies by pollster Morning Consult. Ruling parties that went to the polls this year largely got a drubbing, including in the U.S. and U.K.
Of the 71 national polls held around the world so far this year, around a third resulted in incumbents being voted out of office, according to Shah’s organization.
Wall Sreet Journal today
There is always a mix of social mood. The theory is that positive mood results in a bull stock market, This year’s big winner is just about anything associated with Elon Musk. With the re-election of Trump, his new friendship has spilled into enthusiasm for his companies.
Negative mood results in selling not buying, In politics it brings a throw the bums out mentality. Incumbents usually have an advantage at the national level and politicians spend in office spend attempting to guarantee just that. Bu in France, Germany, England, and here in the US, all incumbents score less than 40% favorable with Macron of France at 19%.
I have been involved in markets since my first Series 7 license in 1973. This week I heard an economist from one of the major league brokerages deliver the most optimistic speech I have ever heard regarding stock market prospects. The His statistics were accurate, his conclusions were not. For example, credit spreads are the narrowest in history. A credit spread is the difference in risk free T Bills and sub investment grade debt. He took that as the all clear sign. But narrow credit spreads are a sign of a market top. When everyone thinks junk rated debt is just as good as investment grade, the concept of risk has been dismissed. At market lows such as 1982, 2002, and 2009 spreads were huge as junk debt defaults and is recognized for what it is, junk.
Transports and Industrials have each dropped 1,000 points while Utilities are down 80 points. This is to be expected given this year’s big rallies. At this point these are corrections. Despite all the optimism for Trump’s return (well among his voters), that mood existed in 1973, 2000, and 2007. Crude oil continues to bounce at 68 trading just over 70 today. Yes, the last FED action was a cut but Ten-Year Treasury yields rose. Those yields are falling for the time being but it will not last. Yields have risen since the March 2020 low and will do so for years to come.
Gold and silver are correcting and will eventually make new highs.