Sanders Win in New Hampshire Stokes the Fire

Bernie Sanders

The idea of Bernie Sanders being the stock market’s best hope for Trump to win is starting to gain more traction. We need to be careful when we wish for this though.

Both New Hampshire and Iowa are proud of their front and center positions in kicking off the Democratic nomination process for president, and New Hampshire has even written the requirement of their being the first primary held in the process into state law. Iowa only gets to go first because it is a caucus, but they have used this loophole to vault them into the spotlight as well.

This certainly benefits these two small states, who do get a lot of publicity at this time, which doesn’t come around very often and is only center stage once every four years provided that a Democrat doesn’t hold the presidency. When you are Iowa or New Hampshire though, you can use all the attention you can get, and their roles in the Democratic nomination process arguably may be the major claim to fame of both states.

If not for this, the results of this primary and caucus would get well buried in the pile. What is really peculiar about all this is how much stock a lot of political pundits put into these two primaries, even though they only decide a very tiny part of the race. Sanders is now being considered the frontrunner, not because he’s ahead in the polls, but because he just won the New Hampshire primary, which is actually pretty bizarre.

This was considered the case even before the latest polls came out that actually do show Sanders as being the frontrunner now, not in New Hampshire or Iowa, but in the United States. This hasn’t been due to anything Sanders has done, and is instead indicative of Biden starting to fade now that the rehearsals are over and the road show is playing live, albeit at only these two very small venues.

Pete Buttigieg actually holds a slim lead over Bernie Sanders in the delegate count so far, 22 to 21, in a race where you need 1990 to win. This is not statistically significant at all, especially since this isn’t even representative of the race overall, as would be the case more if this were a very small percentage of polls reporting nationwide. Instead, it’s a very small number confined to states which are not very representative overall.

Any talk of whatever happens in these two states being meaningful is utter nonsense, at least as far as the results go, but what it does do is allow the candidates to start showing us their stuff more on stage. That’s the part that is representative, seeing Sanders hold up as expected, seeing Buttigieg step toward the front for his at least 15 minutes of fame, seeing Warren fade, and especially seeing Biden start to unravel at the seams.

It wasn’t Biden’s showing that was the problem here, as he is only behind Buttigieg and Sanders by 16 and 15 delegates respectively, and he is poised to start getting on track after the results of the next two primaries in South Carolina and Nevada come in later this month. People in the country overall are taking a dimmer view of Biden though, and he has slipped to second in the race for the first time now.

If the pundits don’t get the statistical insignificance of the results in Iowa and New Hampshire, the voters probably aren’t getting this either, and there are some who view this like they do stocks, seeing the momentum and letting it influence them, pinning their hopes on candidates that are pulling ahead even though we’re only talking a few steps in a race all around the track.

Biden has seen the momentum sucked out of him regardless of why though, which seems in part due to his poor showing in these first two primaries, but is also influenced by his lack of ability to impress very much. He is supposed to be the statesman in the race due to the 8 years he spent standing beside Obama, but his standing alone on the stage without Batman, Robin isn’t turning out to be what his supporters had hoped he’d be.

A lot of Democrats are clamoring for change, which pulls them away from someone like Biden and toward just about anyone else. This does not mean that Biden’s brief departure so far from being the leading contender to Donald Trump is all that noteworthy, other than the fact that momentum does count in politics as well as with stocks and Biden’s stock is dropping fast.

The stock market doesn’t want any of these people in the White House, and are more interested in seeing a nominee that would provide their favorite son, the Donald, with the best chance of winning. This is not at all about politics, as the market isn’t swayed by political ideologies beyond what hurts them or helps them. This time around, Trump helps, and all of the Democratic candidates hurt, some more than others of course.

Sanders is No Political Weakling

The feeling among some is that the market’s best chance may be Trump vs. Sanders, pitting two very polarized candidates against one another and giving Trump a better shot at moderate voters that may see Sanders as even more distant to them than Trump.

This makes a lot of sense on paper, although the polls tell a different story. Sanders is actually pretty competitive with Trump, as he was in 2016 as well, and Sanders fared much better in the polls against Trump than Hilary Clinton. If Sanders won the nomination that year, we would very likely be talking about Trump looking to knock off President Sanders, not the other way around, and Trump remains the underdog here.

The far left almost won that year, and this threat remains in 2020. Trump actually does best against Buttigieg, who are head to head in the polls and the only major Democratic candidate that Trump measures up against. It’s not that he’s that far behind the other candidates, but there is a bigger measuring stick that needs to be brought out here, the old electoral college.

There are some states that Donald Duck could carry as a Democratic presidential candidate, and some other ones that Mickey Mouse or even Donald Trump would carry easily as long as he was of the right party. A lot of the electoral college votes are already decided regardless of who opposes Trump on the ballot, with swing states like Florida, Pennsylvania, North Carolina, Arizona, and Wisconsin providing the real drama.

The rest of the states are either definite or probable on the side of one party over another, and when we tabulate these results, this time Trump is in real trouble. Trump did pull off some real magic in the last few days of the race in 2016, but this time, even more magic will be needed, at a level that may even be well beyond what Trump and his political machine may be able to pull off even as the incumbent.

With 270 electoral college votes needed to win, the Democrats are projected to have 248 votes likely in their pocket already, with the Republicans only sitting with 204. This means that the Democrats only need to get 22 of the 86 votes not counted yet, while the Republicans need to get 66 out of 86.

This is not to say that all of the states in each party’s respective bag are in there for sure, as both parties have states that are only leaning, but the fact that both have these makes this more of a wash than anything and commands our attention toward those 86 votes that are more up in the air.

What this means is that we need to pay less attention to the popular vote in the polls, and more toward how the candidates may stack up against each other in these key states. The fact that the Republicans appear to need to win three-quarters of these swing electoral college votes versus the only one in four that the Democrats seem to need speaks loudly enough to the big advantage they have right now.

This also gives us a good idea of how big of a challenge Donald Trump actually faces in being re-elected, and while we do not want to count him out yet, the odds are stacked a lot more against him than just being a few percentage points behind his rivals in national popularity.

We therefore need to be very careful if we are hoping that Sanders wins the nomination and then makes Trump’s chances higher, as Sanders will probably beat him, and Sanders winning is the worst-case scenario for stocks and the economy. In his famous song, Charlie Daniels might have won a fiddling contest against the Devil, but this Devil is a better fiddler than Trump and this is not a contest that we should ever want to see happen because the soul of the market is on the line this time.

There are few things certain in politics, but the specter of Bernie Sanders as president being a nightmare for the stock market is as sure of a thing as there is. Elizabeth Warren may be even more dangerous ideologically, but Sanders swings a pretty big club as well, and he’s in a much better position to use it to bash Wall Street given his political standing these days.

When You’re This Likely to Lose to Anyone, Who Will Likely Beat You Matters More

Pete Buttigieg might actually be the best hope for Trump winning, not just because of the polling numbers, but due to a number of personal issues with Pete, including being so young, being so inexperienced, and perhaps in particular, being so gay. If you want to galvanize the right and have them behind Trump even more, Buttigieg may be the best choice.

Even though Pete is against capitalism like Sanders is, he’s not quite as hard core, even though he believes that the system is stacked in favor of the wealthy by preventing us from confiscating their money as much as Buttigieg and other Democrats may wish.

There are various threats out there with different levels of risk, with the hard-core ones being of a very high threat level but a very low probability. Buttigieg is all for Medicare for All as well for instance, but he at least understands that this is going to require much thought if we ever do this and probably isn’t going to happen right now.

He also wants to punish the rich as Sanders and Warren does but at least seems to have put more thought into the practicality of this. JP Morgan Chase economist Jesse Edgarton has just reminded us all that you need the Senate in your pocket as well to pull off any of these big military operations against the economy, which isn’t likely, something we’ve been saying all along.

This is not in the bag though, as it’s estimated that there is a 5% chance of the Democrats controlling the House, the Senate, and the Presidency, as the Republicans are widely expected to retain their Senate majority. Edgarton rightly points out though that even if the Democrats manage to take over the hill entirely, the slim advantage that they would have in the Senate at best would be prone to filibustering, where 60 votes would be required to put an end to this, a number well beyond what would be possible for the Democrats to achieve this time around.

This does not mean that a Democratic president could not still do some real damage, and we only need to look to the things Trump has done since he became elected to see that even a lone wolf can disturb the flock quite a bit. Given that the stock market scares so easily, stocks could take a real pounding here if Trump does not win.

Buttigieg is still well behind Sanders in national polling, with about 10% support compared to Sanders’ 23%. Pete is rising up the charts though. There’s a long way to go in the race though, and it’s time to take his campaign more seriously. Michael Bloomberg has quietly moved up pretty fast as well though, and he’s another moderate that may be a good best of the bad choice for the market, even though the chances of Bloomberg beating Trump is higher.

If there was ever a time to have a sitting president compete for his party’s nomination, this would be it, instead of just handing him the nomination by assent as is customary. Defending champions do tend to do pretty well though, although perhaps not this time.

Trump does boast about how he’s improved the economy, and this is one thing that he is allowed to boast about even though the man he sees in the mirror appears to be of a much greater stature than the world sees him. The Democrats want to crash this party, at a time where the situation is just too fragile to mess with this way and not expect real pain.

This is a much bigger risk to the stock market than we generally think, even though the truly dastardly stuff isn’t really on the table at all and just serves to rile up followers. We are not in a very good position to see our economy excessively constricted by tax increases or other means of driving down the economy, and even just losing Trump’s tax cuts would be a very big deal for stocks and the economy, where a recession would likely no longer be just a misguided fear.

The machetes are in full view, with some sharper and more dangerous than others. It’s not that we get to pick here, as we can only root, but we need to be particularly careful rooting for the guy with the biggest sword who can both take Trump and the market down with it.

John Miller

Editor, MarketReview.com

John’s sensible advice on all matters related to personal finance will have you examining your own life and tweaking it to achieve your financial goals better.