Inauguration Day is behind us and thoughts of the next “Wave” crept into my mind. My immediate thought was about previous “political” commentary and what happened during Republican and Democrat administrations. There’s always the good, the bad and the ugly depending on your perspective, however, I can tell you from expereince that I had been trading 6 years when William Jefferson Clinton took over in 1993. He served 8 years and left office in 2001. This is my recollection.
Similar to now, Clinton’s incoming administration inherited a tremendous fiscal challenge. In January 1993 the federal budget deficit was expected to top $300 billion, or 5 percent, of gross domestic product.
The Congressional Budget Office predicted that the United States would add more than $1.8 trillion to the national debt through 1998.
Compare that to stimulus being discussed now of nearly $2 trillion.
The Dow Industrials (INDU) started the first week of Clinton’s term roughly at 3300 (+/-) and ended 8 years later after his second term at 10,899 for a 230% gain.
The Next Wave – Catalysts?
What catalysts would assist in repeating the gains seen during Clinton’s term, again this is a fact finding mission, not a political statement.
- More than 18.6 million new jobs were created. We need a repeat.
- Unemployment dropped from 7.5% to 4%. With Covid we’re twice that and more.
- Home ownership was 67.7%, the highest rate ever recorded at the time.
- I bought my first home during this period.
It is this home ownership that compels me to compare the period between 1993-2001 to now. Why? Boomers are being replaced by Millennials. That’s right. And, millennials are a much larger demographic than it’s predecessor.
If you are a boomer with kids leaving college for their first job, marriage and/or a new “home” you can relate to this life cycle. My oldest daughter graduated university, got married, and bought a new home. She just had her first child.
Multiple expansion will repeat during their lives just like it did for the boomers. Sound familiar? College. Graduate. New Job. New Car. Marriage. Kids. New house. More cars. More kids. More stuff.
This can be seen in the chart below as companies expand and contract during each cycle.
If I’ve learned anything about trading and investing it’s this, the market doesn’t give a crap about your opinion or my political affiliation. And, our objective is to get past this and think about how we make money going forward.
Let me repeat, our objective is to make money. Period.