After reading months of ridiculously goalseeked Wall Street commentary, where first a Trump victory was the best outcome for stocks (at a time when Trump was seen as a favorite to win), then a Biden victory becoming the best-case outcome for risk assets (this predictably emerged around the time Biden took a lead in the polls), then a Blue Wave emerging as the most bullish outcome (around the time a Democratic sweep became the most likely outcome according to polls), and then following a brief detour when Wall Street briefly freaked out about Congressional gridlock when a split Congress suddenly became an all too real possibility, we went full circle and a Trump victory once again became the most bullish outcome (according to JPMorgan), traders and analysts would simply roll their eyes and snicker whenever a new “scenario” emerged from Wall Street’s strategy desks.
There was a simple reason for that: as One River’s Eric Peters explained earlier, ever since the arrival of MMT in March, the simple reality is that for stocks it no longer matters who is president, to wit:
When stocks bottomed on March 23rd, Trump narrowly led Biden in betting markets. But pandemics have consequences and this catastrophe hit a nation that had spent decades optimizing its economy to spur asset price appreciation. America’s financial system was as overleveraged as it was unstable. A depression was inevitable in the absence of something utterly unprecedented.
On March 27th Trump signed the $2.2trln CARES Act, and this, combined with a breathtaking array of asset purchase programs marked the effective start of MMT (Modern Monetary Theory) – with the Fed and Treasury coordinating policy.
And ever since, it has mattered less who wins this election. Because you see, once the link is broken between what the government must collect and what it can spend, who leads the nation is less consequential – at least to stock markets in the near-term.
Of course, cynics will say that the presidency – which long ago devolved into a mere symbolic figurehead position – stopped mattering for markets long before March, and the data will certainly back that up. As the following chart from Ed Yardeni shows, no matter who is president or what whether Congress is united or divided,