Event Highlights: Navigating the 2024 Economic Landscape
/On July 10th, Gilbert & Cook hosted an insightful evening at The Monroe, to delve into the Market Update & 2024 Economic Outlook; with a special emphasis on the influence of this election year's political climate on the economy. Our distinguished panel included Dave Price, Political Expert and Award-Winning Journalist; Kate Gudgel, CFA and Senior Investment Strategist at Gilbert & Cook; and Todd Henningsen, CFA, CFP®, Financial Advisor at Gilbert & Cook.
Political Insights with Dave Price
Dave Price began the discussion with an in-depth analysis of the current political landscape; particularly focusing on the implications if President Biden were to step aside. He elaborated on the complexities of this scenario, noting, "If Biden steps aside, the simplest way to handle the financial aspect is turning to Kamala Harris, as ‘both names are on the check’. However, since the duo has already raised $100 Million from supporters; if they opt for someone else, it could get quite complicated politically and financially."
Dave also provided a detailed update on the polls, emphasizing the growing lead of Trump in battleground states. He highlighted the critical battleground states, including Wisconsin, Arizona, Georgia, Michigan, Pennsylvania, North Carolina, and Nevada, which will be pivotal in the upcoming election.
"Trump is consistently leading in head-to-head matchups, which has many Democrats nervous. However, we're sitting here in July and talking about a November election, so a lot could happen." he explained.
UPDATE: Since the event took place, President Biden has declined his nomination for the 2024 Election.
Market Analysis by Kate Gudgel, CFA
When considering the impact of political shifts on economic performance; it’s important to understand that when we look back at the historical data, the market is positive regardless of the political party that's in the White House. Consider other economic influences historically. In 2008, the great financial crisis provided systematic risk for both President Bush and President Obama. The global pandemic of 2020, impacted markets beyond the control of President Trump or President Biden.
Using historical data, we can see the market's resilience under various political leaderships. "The market has been positive under all six combinations of political control," Kate stated. It is important to focus on long-term investing goals rather than short-term political fluctuations.
"The stock market doesn’t live or die based on who’s in control of the White House or Congress. It’s driven by the fundamentals of companies and economic growth."
While politics are top of mind this year, the market's performance is more influenced by long-term earnings trends and broad-based economic growth. The Gilbert & Cook team brings focus back on the fundamentals and using the data to make logical, reasonable investment decisions.
Although easier said than done, the data shows us that it is better to ignore short-term volatility around elections. Your financial priorities and long-term investment goals should be the most important factors in your investment decision making.
Tax Policy and Economic Forecast by Todd Henningsen, CFA, CFP®
Todd Henningsen provided an examination of potential changes in tax policy and their implications. The impending sunset of the Tax Cuts and Jobs Act in 2026, would result in significant changes to tax brackets and deductions. "If no new legislation is passed by 2026, we’ll see tax rates going up pretty much across the board," Todd explained.
Comparing the tax proposals of President Biden and former President Trump; Biden’s proposal includes increasing the top tax bracket and corporate tax rate, while Trump aims to extend the Tax Cuts and Jobs Act into 2033. Todd noted, "Extending the Tax Cuts and Jobs Act would add $3.5 trillion dollars to the country’s deficit over the next ten years, according to the Congressional Budget Office."
The Federal Reserve and Interest Rates
Historically the Fed has not stood on the sidelines during election years; but rather, continues its dual mandate to keep employment at the maximum level and continue price stability, all while keeping independence from politics. Rather, the Fed's policy decisions and actions during election years have been explained by economic events, as opposed to political party or policy.
Kate projected that the Fed might start cutting rates later this year, likely in September, based on current economic trends. “The Fed is very data dependent. They continue to balance their risks and will follow the data trends. And then with inflation trending lower, and the economy starting to slow down but not contracting yet - that has given them that confidence to hopefully start that new cycle.”
A softening job market has helped bring U.S. inflation down to 2.6%, close to the Federal Reserve's 2% goal. Without any large inflationary surprises, a cut in September seems likely as the Fed can maintain its restrictive policy by matching the drop in inflation with a cut in rates.
Legal Challenges, International Relations and Market Stability
Dave Price provided an update on former President Trump’s legal challenges and their potential impact on the election. He emphasized the importance of not letting political emotions drive investment decisions. "Market performance is more influenced by macroeconomic factors than election results," he stated.
The event concluded with a dynamic Q&A session, where attendees posed questions on various topics, including the impact of geopolitical tensions on the market and the future of U.S.-China relations. Kate Gudgel addressed these concerns, stating, "Geopolitical events cause short-term market volatility, but the long-term trend is driven by economic fundamentals and corporate earnings."
