How to Profit in a Democrat-Led Economy
In hindsight, the market’s extraordinary rally on the heels of Donald Trump’s election was mostly unexpected, until investors realized they had to get on board or miss the bus. And they did – get on board, that is. And they kept coming and markets kept rising.
This time around, investors are expecting markets to climb on the heels of a Democrat-led Congress and Executive Branch. And markets are already rising.
The question a lot of analysts and investors are asking themselves is, will a Democrat-led economy crush the push markets got under a Republican presidency?
My bet is they will.
Here’s what that means for you and your money…
Theory and Practice
Democrats’ feeling about spending is common knowledge, especially when it comes to social services, a Green New Deal, infrastructure, and just about everything that requires a lot of attention and spending.
And there’s little to no doubt there won’t be enough money to spend.
Some of it will eventually come from higher taxes, but by far, the mega amounts of money needed to shower projects and policy prescriptions will come from the Federal Reserve in the form of MMT, or “Modern Monetary Theory.”
Only, MMT isn’t a theory anymore.
The “theory” sure sounded like a lot of hyperbole when Democrat would-be presidential contenders touted its merits in candidate debates, and Republicans knocked it as “bunk.”
But then COVID-19 happened, and MMT became the Republican answer to financing – or “helicoptering” money across the American landscape to individuals, companies, and state and local governments.
What turned MMT, which is mostly described as a “heterodox macroeconomic framework” (or a fancy way for saying an unproven theory), into reality was necessity.
The simple premise of MMT is that any country that controls its own money can print whatever it wants to pay for whatever it has to, whether that’s to finance a country’s deficits or helicopter money, which means shower people with money by simply dropping out of the sky, so to speak.
Pushback on MMT generally comes from conservative voices on fiscal and economic matters, who make the case that printing money to finance spending, especially massive amounts of spending, comes with multiple costs, including eventual inflation, likely devaluation of the currency, and endless deficit accumulation, and all the pitfalls possible trekking down that path.
Then, like I said, COVID-19 happened, and there was no time to debate how to raise money to throw at all the country’s economic problems, so the Federal Reserve, with the total assent of the Republican President, Republicans, and Democrats everywhere, started printing more and more money to throw where they and politicians thought it should go.
And what have been the consequences on exercising MMT? None, so far.
With that genie out of the bottle, Republicans are going to have a hard time knocking what no one complained about in the crisis. And Democrats are going to say, “See? We told you so. MMT is the real deal.”
So, what’s all this got to do with your money?
It’s about all the spending the Democrat-led government is going to pursue to enact all the policies it wants to shower Americans with, which is going to create so many moneymaking opportunities for investors that it’s going to make the “Trump Bump,” which turned into the Trump record-rally run, into a quaint memory of the market’s more measured rise.
Next week, I’ll tell you where a lot of MMT spending is headed, which sectors are going to benefit the most, and I’ll give you a couple of stocks in each sector I think will be extraordinary beneficiaries of MMT.
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