Chairman’s Letter – November 2024

As you read this, the election results are likely in. Although the outcome itself should have a limited impact on the markets, the end of election uncertainty could lead to a rally in equities.

The stock market doesn’t take sides; corporate earnings ultimately drive prices. However, the Price to Earnings (P/E) ratio could vary depending on the election’s outcome. Given how close this election was expected to be, any impact will likely be modest, leaving around 51% of the population pleased and 49% less so.

This fall, we encountered less market volatility than anticipated, largely due to the Federal Reserve’s recent rate cuts and expectations for continued reductions. Strong consumer spending has also played a key role, making a “soft landing” increasingly feasible for the economy. In early 2025, I plan to share a white paper with insights on the election’s economic impact, including the new administration’s policy proposals.

Since President Biden’s election, I’ve suspected he might not seek re-election. My experience working with individuals affected by dementia, Alzheimer’s, and Parkinson’s led me to observe what I believe are signs of cognitive decline. This is not a critique of President Biden or his politics; to me, it has simply been an evident fact. When the Democrats requested early debates, I believed they aimed to highlight this condition, with party leaders concerned about his ability to defeat Donald Trump.

When Vice President Harris emerged as the nominee, the Democrats seemed poised to focus on two primary issues: abortion and women’s rights, and the characterization of Donald Trump as authoritarian. Republicans, in contrast, concentrated on the economy and immigration. Though other topics were raised, these themes ultimately defined the campaigns.

By the time you receive this letter, you may already know the election’s outcome—though close results may still lead to contested counts. However, if the polls have underestimated support for one candidate, it’s possible we could see a substantial Electoral College majority. For months, it has been clear that undecided and independent voters would likely tip the scales, as each party’s core supporters remained steadfast. The real question, then, is which candidate could successfully capture these crucial independent voters.

For me, the ideal election outcome would be a divided Congress.

My experience suggests that a divided government limits sweeping changes, helping to moderate market fluctuations. However, when one party controls the Presidency, House, and Senate, the potential for significant disruption grows.

Aside from these broader themes, both parties may introduce initiatives with economic and market implications, particularly in tax policy. I’ll examine the potential impacts of these policies in my January white paper.

Looking to 2025, three major issues stand out: the status of China’s recent stimulus measures, our national debt, and evolving tax policies.

For years, I was unconcerned about our national debt. However, with U.S. debt now at 123% of GDP—and projected to reach 200% by 2050— my outlook has changed. Jeffrey Saut, former Chief Investment Strategist with Raymond James, was recently quoted as saying, “The markets will tell us when there is too much debt,” and I agree with his assessment.

In closing, I wish you a joyful Thanksgiving and a festive holiday season, and look forward to a happy, healthy, and prosperous 2025.