end of gridlock webinar slides 11-03-2016
TRANSCRIPT
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Election 2016: End of Gridlock03 November 2016
War Room
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HiddenLevers War Room
Open Q + A
Macro Coaching
Archived webinars
CE Credit
Idea Generation
Presentation deck
AccountabilityScenario Updates
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Market Update
Election Models + Forecasts
Impacts of 1 Party Rule
Scenario: Election 2016
Election 2016: End of Gridlock
NEW
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HiddenLevers
MARKET UPDATE
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Market Update
sources: HiddenLevers, Marketwatch, FA Magazine, Financial Times,
British Pound Hits New Lows
DOL shout out to RIAs
Saudi $100b Tech Fund / Unicorn Contractions
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HiddenLevers
ELECTION MODELS + FORECASTS
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FORECAST: Gridlock is what we know
sources: HiddenLevers
Trump + GOP Congress
Trump + Dem Congress
Clinton + GOP Congress
Clinton + Split Congress
Clinton + Dem Congress
Trump + Split CongressStatus Quo
ObamaGOP 54/46GOP 247/188
execsenatehouse
no longerpipe dream
no longerpipe dream
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Electoral Vote Breakdown
Trump voters unlikely to vote for Democrats for Senate in swing states
Result: GOP keeps House + Senate, gains Presidency, and gets Supreme Court back
Trump win implies that he won swing states Clinton win does not guarantee Senate or House wins for DemocratsA moderate Clinton win makes Senate control likely, but House is a steep climb
End of Gridlock: How does it Happen?
sources: HiddenLevers, 538.com
Democrats have to gain 30 seats to control house – possible if Clinton wins by 10+%
Trump Wins, GOP Sweep Clinton Landslide, Dem Sweep
Trump Wins, GOP Sweep Clinton Landslide, Dem Sweep
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FORECAST: Election Models
sources: HiddenLevers , NYTimes, FiveThirtyEight, LadBrokes
Election tending 2/3 toward Clinton win.
Polling Forecasts
LadBrokes Betting Odds
Betting odds2/3 chance that Clinton wins
MXN
Pes
o
Trump W
in
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Truman defeats Dewey / 1948
British vote to quit EU / 2016
FORECASTS: Historical Upsets
sources: HiddenLevers – Brexit Chart, Business Insider
Pound –25%
FTSE +13%
S&P –12%S&P –8%
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HiddenLevers
IMPACTS OF ONE-PARTY RULE
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1 PARTY: Historical Impacts
sources: HiddenLevers, Wikipedia
Major Accomplishments
Medicare
EPA, OSHA, China Open Door
Minimal
Minimal
Tax Reform
Minimal
Welfare Reform
Bush Tax Cuts
ACA (Obamacare)
Split Government does not guarantee gridlock
Major changes, especially social programs, occur during 1 Party rule
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1 PARTY: Trump Win + GOP Congress holds on
sources: HiddenLevers, DonaldJTrump.com
Large-scale tax cuts, particularly for business and upper income
Stated Policies Potential Impacts
Reduce illegal and employment-based immigration (H1B etc)
Repeal ACA
Renegotiate NAFTA and other trade deals
Winner: Businesses, UHNWreal estate sector may get additional benefits
Loser: US Economy, GDP
Loser: Healthcare SectorUncertainty hurts health stocks
Loser: Multinationals, USDTrade barriers hurt US large caps, USD value tarnished
Winner: US labor force (mild GDP contraction assumed)
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1 PARTY: Clinton Win + Dem Sweeps Congress
sources: HiddenLevers, HillaryClinton.com
Raise minimum wage + other pro-labor policies
Stated Policies Potential Impacts
Increase immigration via comprehensive reform
Add public option to ACA, stricter price controls
Raise taxes on high incomes and close business tax loopholes
Winner: Retail sales, low-end consumption boost likely
Loser: Insurers, PharmaInsurers will lose pricing power, and pharma may see price caps
Loser: High-income earners, businesses with foreign earnings
Loser: Domestic unskilled and semi-skilled labor force
Loser: Restaurants, other labor-intensive industries
Winner: US businesses, GDP
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HiddenLevers
SCENARIO: ELECTION 2016NEW
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NEW SECENARIO: Election 2016
source: HiddenLevers
Long Term Impact Short Term Impact
3 months
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Neutral: Clinton Small Win
source: HiddenLevers
Markets expect the gridlock to continue
Slight bounce from FBI sell off
Short-lived rally on certainty
3rd Obama term (i.e. stalemate)
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BAD: Clinton Landslide
source: HiddenLevers
Outsized Clinton win gives Dems House + Senate
Markets fear high taxes +
pro labor policies
Truman 1948 Dems swept
congress
ACA keeps going, pharma may be
reigned in
DOL fiduciary mandate sticks
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BAD: Trump Victory
source: HiddenLevers
Republicans control govt + inherent uncertainty
Immediate uncertainty on immigration
Trump platform2/3 GOP
boilerplate
ACA gets repealed
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Scenario: Election 2016
Neutral:Clinton
Small Win
Bad:Clinton
Landslide
Bad:Trump
Victory
USD
-5%S&P
-8%
USD
FLATS&P
-8%
USD
+2%S&P
+3%
Markets have been expecting this outcome, and it perpetuates gridlock, so that political risk of major changes is low over the next four years.
If Clinton wins with a larger-than-expected margin, Democrats could take Congress, leaving markets in fear of higher taxes and pro-labor policies.
If Trump wins the election, the GOP will likely control Congress as well. Markets’ fear of protectionism and populism contribute to short-term decline.
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End of Gridlock – Take Aways
Electoral Upsets5-10% max draw down
Trump Victoryimmigration shutdown
+ protectionism
End of Gridlock is real market risk, not Clinton v Trump
Clinton Landslidehigher taxes, pro labor policies