In Part 1 of “Investing in the Age of Trump”, we examined the key causes of his unexpected primary performance and potential Republican nomination. While there are no sure bets in politics, last Tuesday’s primaries definitely increased the odds of a Clinton versus Trump match-up this fall. Virtually no one expects Trump to win the general election. But no one expected Trump to win the Republican nomination either.
Given what we know now, the next President of the United States is likely to be Donald Trump or Hillary Clinton, like it or not. Secretary Clinton could get indicted over her poor choice of an e-mail server. This would give Senator Sanders a shot – albeit a long one – but barring a felony charge against her, the delegate math is brutal for Bernie.
On the Republican side, a contested convention would cause such a massive rift in the GOP, it would virtually assure a Clinton victory. The front line voters’ anger that we described in Part 1 will not be assuaged by a John Kasich or Paul Ryan candidacy. Especially one imposed by the same Republication establishment that has fueled middle-class voters’ ire.
Mr. Trump is promising a third-party run in the event any other candidate is drafted, while acknowledging it would “guarantee” a Clinton victory. He also predicted “riots” if the will of his voters is not respected. If Trump is not the nominee, he will make sure whoever gets the nod is crippled right out of the starting gate. Trump’s allegiance is to Trump. If you don’t know this by now, you haven’t been paying attention.
Ted is Dead; He Just Doesn’t Know it Yet
What about Ted Cruz? The way we see it, Cruz has no chance in the general election because he is so adamantly conservative and so disliked – even by most members of his own party. His hard core conservatism is his biggest stumbling block. Trump stands the best chance of beating Clinton because he is not bound by ideology, either liberal or conservative. Political commentators – red and blue alike – seem to miss this key point.
Evangelical voters are flocking to The Donald not because he shares their beliefs, but because they see him as a winner – someone who can compromise to achieve his goals and get something done, even if it means cutting a side deal or two along the way. “All politicians lie” is the mantra of the Trump voter which translates to “Better to vote for a liar who may actually get things done.”
Mr. Trump’s lack of ideological purity also works in his favor because it allows disillusioned voters to project their own beliefs and notions of what is right politically onto him. He will pick up many white male Independents and Democrats in the process who hate Hillary, are tired of being pandered to by ideologues, and promise to stay home if faced with a Cruz candidacy.
Even some disappointed Bernie voters will pull the lever for Trump because they see him as an outsider. Our guess is virtually none of them will do the same for Cruz. Senator Cruz’s scorched-earth policies and evangelical proselytizing may play well in the South, but they will bomb miserably in the big population centers of the Industrial Midwest and along both coasts – places where Bernie has done well.
John is “Gone” But Not Forgotten…
Cruz has no shot at winning Ohio or Florida in a general election. Without these two states, the Republicans are toast. Republican power brokers know this, which is why John Kasich is still in it. The former Ohio governor would probably win Ohio and have a good shot at taking Florida. He and his supporters are betting on this logic. However, a brokered Kasich candidacy would result in a “yuuge” Trump revolt that would do exactly what The Donald has predicted and “guarantee” a Democratic victory.
Ted might be “dead” but unless Mr. Trump self-destructs (something he seemingly cannot do, no matter how hard he tries), John Kasich is “gone” – except perhaps as The Donald’s VP, which puts Ohio back in the game for Republicans.
Bottom line? If the Republicans want to win the presidency in November, it’s Trump or bust. Kasich is essentially running for Vice President – and will probably get it. Florida Senator Marco Rubio is in the running for VP as well, but bad blood between him and Trump tilt the VP spot toward Kasich.
Hillary and Donald Agree on Infrastructure…And So Does Everyone Else
Given the odds favor Hillary or Donald for President, let’s look at some the policy areas in which they both agree. Infrastructure is the main one. In fact, nearly everyone in Washington wants investment in infrastructure for practical reasons – it is crumbling – and for political ones. There’s nothing quite like a good road and bridge project to juice up lucrative construction jobs and win the hearts of constituents. As someone who makes his living on building projects, Trump could be an even greater beneficiary.
Of course the two sides will argue about how to pay for it. Assuming it is the one thing that nearly everyone wants done, what’s a better way to start a presidential term than to get behind a big, multi-billion dollar, bi-partisan infrastructure bill? You get rid of 16 years of bad blood between the parties and ease the political gridlock Americans are sick and tired of at the same time.
The market is already starting to sniff this possibility out. The common stock of construction-equipment maker Caterpillar (CAT) just hit a new, six-month high. Other industrial names like Cummins (CMI), maker of diesel engines, are also doing well. But the market that has really caused us to sit up and take notice is copper. Traders refer to the red metal as “Dr. Copper” because of its ability to predict moves in the overall economy – implying that it has a doctorate in economics.
Data Source: Reuters / E-Signal
The red metal just recently negated a long-standing downtrend and appears to be bottoming along with a number of key commodities like gold, silver, sugar and crude oil. Is the 8-year commodity bear market ending? Will the next president have to deal with rising prices? It is still too early to tell, but Dr. Copper certainly bears watching.
Hillary and Donald Also Agree on Trade
Donald Trump and Hillary Clinton also agree – at least in a broad sense – on trade. Both have promised to reject America’s big trade agreement with Asia (TPP). Mr. Trump takes things a bit further, talking about imposing big tariffs on products made by US firms that relocate headquarters overseas. History tells us that tariffs are a bad idea because trade partners retaliate, devastating global trade. Many blame the infamously protectionist Smoot Hawley Tariff Act of 1930 for making the Great Depression that began with the 1929 stock market crash, much worse.
A trade war could throw a wrench into the baby bull we see developing in commodities, and, if history is any guide, could eventually lead to a shooting war. We’ll cover this possibility, and other possible scenarios, that could develop in a Trump or Clinton presidency in Part 3 of Investing in the Age of Trump.
In the meantime, it may make sense to take a good individually managed futures accounts run by Commodity Trading Advisors (CTAs) that specialize in physical commodities. Give RMB Group a call at 800-345-7026 or 312-373-4970 if you would like to learn more about the CTAs we are following right now.
Lumber and tropical commodities have already put in solid bottoms. Row crops like corn and soybeans may be next. RMB Group trading customers are already long soybean oil. Watch this space for more.
To find out more about individually managed futures accounts, download our free booklet and accompanying video – Opportunities Outside the Stock Market – today.
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