WATCH THE STOCK MARKET

I’ve been saying for a while that one thing that could significantly boost Donald Trump’s chances of winning is a serious downtown in the economy. Whatever ugly, racist, bigoted, or politically ridiculous statements he makes, a recession plays right into his strengths as a businessman, billionaire, and deal maker. Republicans and democrats have both attacked and will continue to attack his business credentials (Trump steaks! Trump water! He inherited daddy’s wealth!). But it’s undeniable at this point that one of Trump’s greatest assets is FEAR. When voters are afraid, they turn a blind eye to his ugliness and cast a ballot for Trump.

This is where the stock market plays a big role in the election. From last summer until mid-February, the S&P 500 fell significantly. Since then, the stock market has had a remarkable turnaround. After bottoming somewhere around 1875, the market has risen back up to 2075 —that’s a 10% rise in less than 2 months.

But you can also see that since the start of April, the market has been lurching ever so slowly DOWN again. If you look at the far right side of the chart, the market has been struggling since April Fool’s Day.

This, I should say, is PERFECTLY NORMAL. The market doesn’t move in only one direction. In fact, you would expect after such a strong move up, that the market would cycle back down again. It wouldn’t surprise me if the S&P fell back to the blue line is on the chart above.

But the REAL REAL question is what happens next. After a natural decline, does the stock market keep moving higher? Or is the long term trend that it continues to fall, as it has been doing since last summer? If so, then the economy may be in big trouble. The stock market is not a perfect proxy for the general economy but it’s a rough estimation.

Tellingly, this is EXACTLY what happened back in 2008, just before the start of the Great Recession. Back then, the stock market was falling in late 2007 through early 2008. Then the market made a huge move UP from March to May 2008. However — and here’s the key — it failed to make a “higher high.” That is, even though the S&P made it all the way back up to 1400 in March 2008, that high was still LOWER than the previous high of 1539. What happened next was the S&P fell down again, and this time it fell hard. The economy collapsed as did John McCain’s chances of winning the 2008 presidential election.

We are just about at the SAME key pivot point now in 2016. The stock market had been falling from last summer through February. It then rose through early April. But we failed to make a “higher high.” Now, the market has been falling for the last week. And the question is, what happens next? Will the market keep moving HIGHER or LOWER?

Friends, I have no idea. If I could tell you I’d be a rich man. :) We will have to wait and see. But the market will reveal its hand over the next 1–2 months. And which way the market moves will very likely play a big role in who ends up in the Oval Office next year.

It won’t play the ONLY role. But an economic decline will make it significantly harder for Hillary Clinton to secure the nomination or win the general election. Depending on the timing, it may also boost Bernie Sanders chances. (Unless it happens after Clinton’s locked up the nomination.) A stock market decline will probably help Donald Trump in general. It hurts Ted Cruz against Donald Trump, but in a fight against Hillary Clinton it probably helps him.

Isn’t current events fun?!? :)