I had a business professor who was frustrated with our class and unexpectedly changed his test schedule. We complained that it wasn’t normal to change the test dates from what was printed in the syllabus, and he said, “That was yesterday’s normal; today’s normal is a different normal.”
Nothing is deterring this stock market. On the Monday after the attempted assassination of President Donald Trump in Pennsylvania, the Dow Jones Industrial Average and the S&P 500 hit new all-time highs. This isn’t normal. Not that anything in America seems normal anymore.
There were ten attempted assassinations, from President Teddy Roosevelt in 1912 to President George W. Bush in 2005, and the Dow Jones averaged negative over 1% on the next trading day afterward, according to CFRA Research. But not this time; the first trading day after the Trump shooting saw the Dow Jones up half a percent and the Russell 2000 up almost 2%.
Both stock indexes and government bond yields rose. It seems investors are assessing that the assassination attempt on Donald Trump makes his victory in November more likely. We see that in the “Trump trade,” investors are moving into holdings that would benefit from a second Trump administration and a possible Republican sweep in the House and Senate. These holdings would benefit from extended (possibly expanded) 2017 Trump tax cuts, pro-business regulatory policies, steeper yield curve, rising long-term yields, stronger U.S. dollar, weak Mexican peso, weak Chinese yuan, deregulation for banks, and energy.
I can not state enough how this is a break from history. The day after John Hinckley shot President Ronald Reagan at the Hilton in 1981, the Dow fell 1.4% after the shooting. The failed assassination of Franklin D. Roosevelt a few days before his inauguration in 1933 pushed the Dow negative 4.3%, and the Dow lost 2.9% after President John F. Kennedy was killed in 1963, according to information from CFRA Research. This trend was bucked this year to show us how crazy this political year has become.
Neither of the Roosevelts, Reagan, or Kennedy had a public stock with a ticker symbol containing their initials. On the first trading day after this shooting, shares of Trump Media & Technology (DJT) were up over 30%. As were gun maker stocks like Smith & Wesson Brands, which was up 11%, and Sturm, Ruger & Co., which closed up over 5% on the Monday after. These are crazy times.
Not only did investors shrug off an attempted assassination of a major party candidate, but they hit the gas pedal. Investors who have ridden the emotional roller coaster of the pandemic market and political turmoil are focusing more on earnings, artificial intelligence, inflation, and interest rates, which has made them have a thick skin for national crises that didn’t affect them personally.
These investment trends are worth watching. Given heightened geopolitical threats and US election uncertainty, this market will undoubtedly have some volatility in the next few months. I have rebalanced my portfolios and I am keeping a keen eye on the broader market.
That professor and I weren’t fond of each other, but he was right; the normal we are used to is a different kind of normal today. It reminded me of the great quote from a lousy president, Andrew Jackson, which says, “I was born for a storm, and a calm does not suit me.” This new normal for investing will be successful for investors who can ride out a storm and make good, unemotional decisions.
Have a blessed week!
Richard
Opinions voiced above are for general information only & not intended as specific advice or recommendations for any person. All performance cited is historical & is no guarantee of future results. All indices are unmanaged and may not be invested directly.
The economic forecast outlined in this material may not develop as predicted & there can be no guarantee that strategies promoted will be successful.
Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.