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Dear Consumer: Breathe! (Craig Douglass On Consumers)

3 min read

Did you hold your breath during the weeks and months leading up to the Nov. 8 presidential election? Consumers did, as they waited for the outcome. The reticence to exhale was not necessarily based on who would win the privilege of occupying the White House (or continue to live at Trump Tower, as the case may be). But simply waiting until it was all over so we could get back to life uninterrupted by the quadrennial, quintessential exercise of American democracy.

Third-quarter economic activity was tepid. Sales tax collections, as one measure, showed that consumers were holding fast to their discretionary income until life became more certain. We’ll talk more about the importance of certainty below.

The election is over. Exhale. The holidays are here and retail doors are ready to be busted in search of discounts and deals designed to spur consumer spending. And overall spending should see an upturn.

Post-election consumer confidence has leapt. The University of Michigan reported last week its final 2016 Consumer Confidence Index, which rose to 93.8 from October’s 87.2. News reports covering the index posting suggested Americans were “heartened” by a Trump victory. Perhaps. We rather suspect Americans were buoyed by the fact that the union survived the 18-month-long campaign intact, and television cable news, online postings, newspapers and other forms of mass communication could now return to stories and video content reporting on the passing parade of more local human interest.

Noting a lack of consumer spending before the election suggests a cause and effect scenario leading up to the final casting of ballots (early voting notwithstanding). The cause could be described as a trashing of the American economy, our economic system and economic policy; something badly broken in need of major fixing. A change election. The result, we think, was a distracted and non-participatory consumer choosing not to engage in that economy until a rosier picture emerged, which usually happens after the campaign. Let’s wait it out and see what happens. This thought is surely not original with us.

What has happened is a form of greater certainty that hopes for stability. And certainty and stability beget predictability, as chief executives, chief marketers and chief communicators are allowed to research, plan, develop and implement business strategies unencumbered by head spins resulting from the latest political surprise or off-the-wall tweet.

Quantified consumer spending is one thing. The confidence of the markets, the “street,” is quite another. As we write this monthly offering, the Dow Jones Industrial Average has moved upward past 19,000. Imbued with greater certainty, traders are looking for increased earnings from publicly held companies surely to benefit from a back-to-business calming.

We cannot, however, miss an opportunity to look at stock market performance based on who is in or out of presidential power. How did the markets do during Democratic or Republican administrations?

Bloomberg reports the following returns for the S&P 500 during presidencies since Herbert Hoover’s, beginning in 1929.

S&P 500 Average Total Return: Republican, 16.61; Democrat, 57.44 percent.

S&P 500 Average Annualized Return: Republican, 1.71 percent; Democrat, 10.83 percent.

Bloomberg is quick to point out that “… it is clear that U.S. stock returns have been much better when a Democrat was the president; however, it would be a mistake to conclude that stock returns were higher because a Democrat held the presidency.” There are myriad factors impacting returns, of course. And facts are stubborn things.

May we suggest, as with other incoming administrations, there will be a “honeymoon” period. Sure. There will be. We are not sure, however, how long it will last because of that pesky group of other elected officials called the Congress. They will weigh in, and soon.

So while the honeymoon lasts, take advantage of the free and happy opportunity to participate in the most resilient and rewarding economic system ever created. And breathe!


Craig Douglass is an advertising agency owner and a marketing and research consultant. Email him at Craig@CraigDouglass.com.
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