Party Like It’s 1968
I graduated Germantown High School in Philadelphia in 1968. That might have been the least momentous thing to happen that year.
The year started with the Tet offensive in which Viet Cong regulars swept across Vietnam claiming most of the country outside of Saigon. We didn’t know if then but that was the beginning of the end of that war and a sad long defeat for the United States.
Martin Luther King Jr was assassinated on April 4th. Riots broke out across the country.
Bobby Kennedy won the Democratic primaries to become the official Democratic Candidate for President and was immediately assassinated. That was June 5th. With the primaries over, the Democratic Party was without a candidate. They had no choice but to choose a candidate at the upcoming convention in Chicago in August. But the Students for a Democratic Society strongly objected. Chanting “The whole world is watching” and protesting outside the convention in mass, the Chicago Police in mass lost their temper and a police riot broke out as Chicago police attacked the protesters.
The SDS was objecting to a candidate being chosen for them, rather than one democratically elected. But with the primaries over and the candidate dead, there was no other choice. The very progressive Hubert Humphrey was chosen amidst the backdrop of violence and despair in a year of massive civil disorder, death and destruction.
And as bad as all that was, it wasn’t the worst problem the Democrats had that year. George Wallace was running as an independent. Since the Civil War the South had always voted for Democrats. Wallace took the Southern vote with him and a significant number of southerners voted Republican for the first time because the Democratic candidate, Humber Humphrey, was a civil right champion.
Richard Nixon won the election with only 43% of the vote.
In so many, many was 1968 was a very ugly year.
Except in the stock market. That year the Dow Jones Industrial Average gained 11%. Which might make your head spin until you realize, the value of companies has very little to do with politics or news. To be sure, politics influences business but at the end of the day, the business of America is business.
Which brings us to 2024.
We begin 2024 with tangential involvement in two wars, Ukraine and Israel. This year we will have a presidential election. Elections almost always feature the challenger repeatedly telling everyone how terrible the economy has been for the last 4 years under the incumbent. So right off, we know investors will be hit over and over again with messages about how bad things are.
This fascinating process has actually already been underway for some time. At least that’s one possible explanation for why consumer confidence is so low at a time when the US economy is arguably the best in the world as measured by total economic gains, inflation rates and employment rates. So why are people so glum when almost every economic measure says these are happy days? One explanation is the steady drumbeat from the opposition party about how bad things are. I expect that drumbeat to get louder in 2024.
But that’s just business as usual. 2024 will hardly be a usual election. The front runner for the Republican Party is a 78 year old who, if elected would be the oldest president in American history, assuming he lives long enough to see the end of his term.
His opponent is currently the oldest president in American history and is 3 years older. So with two candidates at 78 and 81 years old, the winner will be the oldest in American history.
Why do I mention this? Health. The older we get the more suspect our health is. It’s just numbers. Either or both Trump and Biden may have a health scare this year which could throw a bit of chaos in to the picture.
And there’s all those indictments. This year Trump will be on trial as a defendant in state court in Georgia, Federal court in Florida and in Washington DC, and in civil court in New York. Four trials. Three criminal and one civil. They are bound to generate lot’s of headlines and turmoil through the year.
Meanwhile the president’s son, Hunter Biden will also be on trial and it’s possible the House of Representatives will have an impeachment trial of Joe Biden.
Quite a lot to worry about. So what should we do? Remember 1968. Things might get as bad this year as they were in 1968, but probably not. And in that dark year, the stock market rallies 11%. So take some deep breaths and try not to get distracted by the drama. Washington is really good at drama. But they don’t run companies. The business of America is business.
What will most likely matter most to our investments this year is none of the above. Rather expect the actions of the Federal Reserve to still be the most important thing in town. The interest rate increases of the last two years finally appear to be having their effect. Inflation which was around 9% in June of 2022, is now, depending on the index used, as low as 3% and expected to decline to 2% this year.
In 2022 I published a prediction that by 2024 we’d have headlines worrying about deflation. I was a little conservative in how long I thought that would take. This headline appeared last month in CBS News, “The US Economy Has A New Twist: Deflation”. And the CEO of Walmart has stated that he expects falling prices in the coming months.
If deflation actually shows up, or if the economy falls into recession, or just slows even more than it has, expect the Fed to lower interest rates sooner than they expected to. There’s a lot of ifs here but it really looks like the stage is set for 2024 to be a good year for investments even if it’s a terrible year in politics.
And for all you who think the economy is bad, consider that since 2017 the world economy has grown by roughly $9 trillion. If I asked most people what country had the largest share of that growth, the answer would probably be China. Far from it. Half of the growth in the world economy is in the United States. Half.
So, hang on, it might be a wild ride. Try to remember what’s important. See you next month.
Hal Masover is a Chartered Retirement Planning Counselor and a registered representative. His firm, Investment Insights, LLC is at 508 N 2nd Street, Suite 203, Fairfield, IA 52556. Securities offered through, Cambridge Investment Research, Inc, a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Investment Insights, Inc & Cambridge are not affiliated.
Comments and questions can be sent to hal.masover@emailsri.com
These are the opinions of Hal Masover and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results.