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If you think back to Election Day 2016, most market-watchers were predicting a pronounced downturn in the event Trump was elected.
And that night, if you recall, when he was elected, Dow futures even nosedived several hundred points… before they "rebounded," to put it mildly, in a rally for the history books. The "pronounced downturn" lasted all of about two hours in the dead of night.
Whatever their political inclinations – and we don't "do" politics here – investors quickly realized they had to get on the bus fast or miss out, which helped propel even more gains.
And once the 2020 election was over, markets decided they liked the prospects of a divided government because, traditionally, markets like it when one party acts as a functional check on the other – the S&P 500 advanced 11% or so between Nov. 3, 2020, and Jan. 6, 2021.
But, contrary to some expectations, the Democrats clinched the Senate on Jan. 6… and markets have still come up more than 1.5%, albeit with a little volatility along the way.
So, what gives? Well, shockingly, talking heads will always say the markets will tank if "the other guy" wins. History, on the other hand, shows, all other things being equal, that rarely happens.
The truth is, and, again, history backs me up here, there are going to be tons of moneymaking opportunities and profit catalysts with the Democrats running Washington… just as there were when the GOP was.
Of course, the nature of the opportunities will be different; I'll show you how in a second.
But red or blue, the end results will be the same: Green money in your pocket…
Turning the Page and Raking It In
The two parties' approach to corporate affairs is common knowledge. Traditionally, Republicans favor tax cuts and deregulation, which bolster corporate profits, stock buybacks, mergers & acquisitions – all kinds of business activity.
Democrats on the other hand historically opt for more spending and complex combinations of entitlements, higher taxes, and tax credits to nudge things in the preferred direction. Both parties pull different "strings," if you will, to get the economy and markets dancing.
MOVE NOW: Investors are feeling the pain of Bitcoin "FOMO" right now as Bitcoin soars past $40,000. There's still time to act – but as the chart in this forecast shows, in a very short period of time, it could be too late…
Nowadays, however, the Democrats have Modern Monetary Theory (MMT) in their spending playbook.
Only, MMT isn't a theory anymore.
At one time, the "theory" sounded like so much hyperbole; Democrat presidential nomination contenders touted its merits in debates, and Republican orthodoxy knocked it as so much "bunk."
Of course, that was before COVID-19. That's what it took to turn MMT, or "a heterodox macroeconomic framework," into reality. Necessity is the mother of invention, they say.
This heterodox macroeconomic framework (which, in plain English, means "new, unproven economic theory") quickly became a kind of bipartisan answer to the pressing problem of "how do we get trillions of dollars to companies, individuals, and state and local governments?" You've heard the phrase "helicopter money?" Well, MMT is what went into the chopper's gas tank.
The simple premise of MMT is that any country that controls its own money can print whatever it wants to pay for whatever it has to, whether that's to finance a country's deficits or figuratively drop money from the skies from helicopters.
$353 BILLION CAPITAL WAVE: A projected tidal wave of capital is heading toward five specific companies – details in here…
Pushback on MMT generally comes from fiscal and economic conservatives. They make the case that printing money to finance spending – especially massive amounts of spending – comes with steep downside, like inflation, currency devaluation, and mushrooming deficits – all the boogeymen that keep conservative economists up nights.
Of course, in the grips of a deadly, economy-crushing pandemic like COVID-19, there was just no time to debate how to raise money to throw at all the country's snowballing economic problems.
So it was that the Federal Reserve, with the total assent of the Republican president, Republicans, and Democrats everywhere, started printing more and more money to throw where they and politicians thought it should go.
So, what have been the consequences of this massive, unprecedented experiment in a heterodox macroeconomic framework? What has been the downside of Modern Monetary Theory in practice?
Well… none. At least, none so far.
MMT Could Drive Profits from Here on Out
That genie is out of the bottle. Republicans are going to have a hard time knocking what essentially no one complained about in the COVID-19 crisis. Democrats are going to say, "See? We told you so! MMT is the real deal."
With that in mind, the Democrats could very well have free rein to pursue a raft of policy priorities, including renewable energy investments – the so-called "Green New Deal" – infrastructure spending, and healthcare reform. Healthcare reform attempts alone could be a huge boon to healthcare stocks – except for the drug-makers.
For instance, I happen to think these five stocks belong in everyone's portfolio – especially now.
I've pointed to stocks like Clean Energy Fuels Corp. (NASDAQ: CLNE) as a major beneficiary of the policy of "greening," and U.S. Lime & Minerals Inc. (NASDAQ: USLM) as a potential standout from the infrastructure push you just know is coming. We'll see whole indexes lifting higher as Democrats open up the money tap to boost coronavirus recovery; I particularly like the prospects of the small-cap Russell 2000 Index, as tracked by the iShares Russell 2000 ETF (NYSEArca: IWM).
And remember, there's little to no doubt there will be money there to spend. Our job is to be there when it happens.
And over the next few days, I'll be talking some more about Modern Monetary Theory, and name some stocks that'll benefit from it over the next two to four years. My experience tells me there'll be no shortage of ways to profit. It's possible there'll be no stopping the $353 billion tidal wave of capital that could be heading into these five companies over the next 18 months, either…
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.