Donald Trump’s stunning victory blindsided investors and media pundits alike—not to mention part-time finance bloggers like myself. Last week, I all but guaranteed a Clinton victory, and predicted that it would probably lead to slower earnings growth for health care and energy companies, as well as continued anemic economic growth for the country as a whole.
After one of the longest, weirdest, and most exhausting election seasons in our history, we are only six days away from (finally) choosing a new president. As importantly, 34 Senate seats and all 435 House seats are up for grabs.
Investors are justifiably nervous about the outcome. Yesterday’s selloff was probably a symptom of that unease. Betting markets currently predict Hillary Clinton has a 70-75 percent chance of winning. I suspect her odds are much better. Four years ago Obama’s five million vote victory was fueled by a 56 to 44 percent majority of female voters and an even greater 74 to 26 percent majority of Hispanic voters. I am 99 percent certain Trump will do worse with both groups. Ever since he announced his candidacy Republican leaders (and media talking heads) have known that women and Hispanics would be his Achilles heel and yet, shockingly, he has made no effort to improve his appeal to these voters. Either he is delusional about his chances or simply refuses to learn the daunting math required for a Republican to win the general election.
The Donald’s only hope is the fact middle-of-the-road voters seem to dislike Hillary almost as much as they dislike him.
On Monday night, more than eighty million Americans watched our two candidates for president argue more about missing tax returns, deleted emails, and a former beauty queen than the issue that matters most to our country’s health and prosperity: economic growth.
When our economy grows rapidly, as it did during the Reagan and (Bill) Clinton administrations, good things happen. Home ownership increases, budget deficits shrink (Mr. Clinton produced a surplus his last four years), crime drops, and America’s influence increases worldwide. Unfortunately, our gross domestic product hasn’t grown more than four percent a year since the end of the last century, and I don’t see it topping that critical figure again anytime soon.
I have to admit, I’m looking forward to the Republican debate on Wednesday. Love him or hate him, Donald Trump’s candor is entertaining. It’s somewhat fun to watch him dismiss his political opponents (including the sitting president) as “losers” and “lightweights,” and his critiques of my industry—which he refers to as “those hedge fund guys”—are mostly spot on. Too many big fund managers really are little more than under-taxed, economically destructive financial engineers. Trump’s strident anti-immigrant rhetoric is far more troubling, but it’s not hard to see why it appeals to voters who feel left behind by globalization and the increasingly polyglot composition of America’s electorate.
Most economic studies show that immigration, legal and illegal, is a net contributor, not a cost, to economic growth. Three decades ago, the legendary University of Chicago economist Milton Friedman noted that the majority of illegal immigrants work, pay income and payroll taxes, but rarely receive government benefits like Social Security and Medicare. Mr. Trump, on the other hand, has frequently been on the receiving end of government largesse. Despite his professed belief in free markets, he is the prototypical crony capitalist. Without all sorts of tax breaks, debt forgiveness, and giveaways, he would be far less rich.