Is Another Historic Presidential Election On The Horizon In 2020?
/Hi everyone,
This is random, but something so interesting that I wanted to share. There is a possibility, albeit a small one, that we may see a truly rare 2020 presidential election. What if I told you that the House of Representatives could decide the next U.S. President?
Following the 2016 election, I felt that President Trump’s success would open the floodgates for all sorts of independent candidates to emerge in 2020. Whether truly independent or loosely tied to their political party like Trump, more independent candidacies means more split votes.
If it happens where a handful of independent candidates garner enough votes, the result could be that no candidate — Republican, Democrat or otherwise — captures the majority of electoral college votes required to win the presidency. This requires winning 270 of the 538 electoral votes. If this were the outcome, the House of Representatives elects the president by voting among the top five candidates. Each house representative has one vote. Majority wins.
There is precedent for this but it was 200 years ago. These “contingent” elections occurred twice — first when Thomas Jefferson won in 1800 and again when John Quincy Adams won in 1824.
The last independent candidate to muster a legitimate presidential bid was Ross Perot in 1992. He won just 19% of the popular vote, carrying no states for a whopping zero electoral college votes. And that was considered remotely successful.
For this to occur today, it would effectively mean that the current two-party system is blown up, which a lot of people think is inevitable but has not come close to happening. So it seems unlikely that the above scenario would play out, but then again, after the 2016 election anything seems plausible.
In The Market...
The S&P 500 gained +2.5% last week. Let's look under the hood:
(price data via stockcharts.com)
Another nice week for stocks, which have now gained in five of the first seven weeks to start the year. Every stock sector was higher as rising momentum has sustained along the way. Bonds were more mixed, as Treasury yields rose (Treasury values fell) but not as much as we might have expected given the rally in stocks.
Last week I discussed how we incorporate the 200-day moving average into our analysis, highlighted by the fact that more stock prices were rising above their respective 200-day average prices. Last week, 50% of stocks in the S&P 500 were above that mark. Entering this week, 61% are above their 200-day moving averages.
This is encouraging because it reflects that the stocks that comprise the market (via the S&P 500) are rising together. If the S&P 500 index were rising but the percent of stocks above their respective 200-day moving averages was stagnating, it would indicate that the larger companies in the S&P index are doing all the heavy lifting (since the 500 companies in the index are weighted based on size).
However, there is a ton of potential price resistance ahead in the near future. In the chart below, I have circled the four previous instances over the past year where the S&P 500 tumbled upon trying to break out higher:
(created in stockcharts.com)
In comparison to the previous instances from this past October and December, stock price momentum is stronger today than it was last Fall. These statistics are not shown above, so you will have to take my word for it.
We sold the Cloud-Computing Tech fund (SKYY) and purchased an Industrials sector fund (XLI) across most accounts. While the software niche within Tech has been on a tear, prices were starting to bump up against previous highs. Industrials, meanwhile, appear to have more room to run before hitting resistance. As such, we rotated from one to the other.
Additionally, we purchased a Preferred Stock fund (PGF) for certain accounts, representing a bond position within those portfolios. Preferred Stock — and the broader bond market — continues to appeal on both short-term and longer-term time frames.
In Our Portfolios...
What's New With Us?
The snow finally cleared and the new highway-99 tunnel running through downtown Seattle has finally opened. Slowly our office hours are getting back to normal as we enter the thick of tax season.
Have a great week!
Brian E Betz, CFP®
Principal