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THE 2024 ELECTION & POLICY INVESTMENT PLAYBOOK

by Fortem Financial May 29, 2024

Now that we are past Memorial day in an election year, all eyes are on the upcoming election. We get a lot of questions as to what the market usually does in election years. I thought it would be helpful to share some information on what we should expect.

 

  • Macro/Pre-Election: Policymakers Will Keep Liquidity/Stimulus Flowing In 2024
  • S&P 500 has increased in every presidential reelection year since 1944 as sitting presidents stimulate the economy ahead of their reelection. Average return is 16% annually.
  • Biden is willing to use the tools available to him more than other presidents as he sees this race as Biden vs the end of democracy.
  • For example, Biden is ignoring the Supreme Court and has distributed more than $100bn of student loan forgiveness in tranches.
  • If oil prices rise, Biden will use the Strategic Petroleum Reserve to keep oil prices low.
  • $100bn of infrastructure spending being unleashed through IIJA, CHIPs, and IRA in 2024 FHFA is likely to approve a plan in June allowing Freddie Mac to purchase second liens.
  • More than 1 million applications for the Employee Retention Tax Credit are sitting at the IRS which the IRS is legally obligated to pay. This adds another layer of consumer stimulus that can be distributed in the second half of the year.
  • The Federal Reserve will slow the pace of its balance sheet contraction starting in June.
  • June is a smaller hiccup compared to April, and once June clears out, we expect liquidity to flow through the election starting in July.
  • We expect to see a large increase in T-bill issuance starting in July. Much of that issuance increase will be funded via money market funds parked in Reverse Repos. As money comes out of the RRP and into the Treasury market, liquidity increases, all else being equal.
  • Liquidity through the Treasury General Account and Reverse Repos is highly correlated to the US dollar, 10-year yields, and corporate bonds.
  • We see more risk in 2025 than 2024 as the hangover from this easing, the stickiness of inflation, and the fiscal cliffs comes to fruition.

S&P 500 Total Return in Election Years with Incumbent President Running for Re-Election

Source: Strategas

 

Market and Index Changes for the Week Ending 5/24/2024

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments. Data provided by Refinitiv.

 

Sincerely,

Fortem Financial
(760) 206-8500
team@fortemfin.com

 

 

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The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

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