2020: Looking Past the Gloom

Back in 2000 it took five weeks until the winner of the tied presidential election was known.  George W. Bush triumphed over Democrat Al Gore only after the Supreme Court ruled that Bush won a disputed recount in Florida and thus achieved a bare one vote majority in the electoral college. Gore narrowly won the popular vote. 

 When it was determined that Bush would be president, Alistair Cooke said in his “Letter from America” on the BBC that U.S. citizens had survived a constitutional shudder “with remarkable self-control.” 

Cooke died in 2004 at the age of 95, but If he were alive today what would the esteemed broadcaster say about the 2020 election?

My guess is he would repeat the last half of his earlier assertion, that “Americans had shown remarkable self-control.” This not with-standing the stark reality that four weeks after the election the losing candidate, Donald Trump, had not conceded that he lost. 

But unlike 2000 there is no constitutional shudder even though the loser insists  the vote was rigged. My prediction is that when the electoral college meets on December 14th, Joe Biden will be certified as president-elect.  With 270 electoral votes required, Biden has 306, Trump 232. It’s not even close. In the popular tally Biden got 80 million votes to Trump’s 74 million. 

Beyond politics the corona virus dominated the lives of Americans in 2020.

The first U.S. case arrived January 20th when a 35-year-old man tested positive when he returned to Seattle from visiting relatives in Wuhan. He recovered but on February 20th several elderly residents in a Seattle nursing home became infected.  That same day the stock market sold off from near record highs, beginning a two-month rout in which prices plummeted 35%.  Eight trillion dollars of equity evaporated. The panic was driven by fears of global depression.

That prognostication wasn’t far-fetched. Dr. Doom, Nouriel Roubini of New York University, predicted the pandemic recession would be worse than the great depression. There were forecasts of mass unemployment and bankruptcies. In February President Trump designated his vice-president as chairman of a corona virus task force to coordinate government containment efforts.

During March and April. the task force impressively led a public/private response, boosting production of surgical masks and hospital ventilators. But virus testing was slow and President Trump got low marks for leadership. He vacillated between tough anti-virus measures and a desire to keep the economy open. Increasingly frustrated, Trump blamed China for unleashing the virus and he seldom wore a face mask. In sum, the United States lacked a coordinated national strategy as the administration punted and assigned responsibility for dealing with the crisis to the 50 state governors.   

It’s not a stretch to say President Trump was defeated because he failed to effectively manage the corona virus. Had the presidential election occurred before the virus when the economy was booming, most likely he would have won in a landslide.  

Less than a week after the election, Pfizer, the big U.S. pharmaceutical company, announced that  patient trials for its corona virus vaccine were 90% effective.  A few days later Moderna, a bio-tech company in Boston, announced that its vaccine also was very effective in trials. 

The news of a vaccine was greeted with euphoria in financial markets.  The rebound that had been underway since mid-year gained powerful momentum and November was the best month for the major indexes in 33 years.  The message was unmistakable. Investors are looking past the virus and a quarter million U.S. deaths and even the record spike in new cases.

What accounts for this extraordinary turnaround? How can business sentiment be rebounding when 12% of Americans, according to reliable surveys, are not getting enough to eat, when 12 million people are likely to lose government income support assistance at the end of the year, and when one-third of Americans are having trouble paying their bills?

The answers are, in my opinion, the election and the prospect of divided government. Trump may be out but Republicans are likely to keep the Senate, thus preventing a roll back of the 2017 tax cuts as well as implementation of an expensive green new deal environmental program.  Then there is cheap money and the easy availability of credit. And finally, the highly touted vaccine. 

There was a very sharp contraction in economic activity but that has been followed by an equally sharp rebound. Working from home may be the new normal but that seems not be a problem.   Markets and the big money people behind them are betting that with an effective vaccine 2021 will be a good year and that like China, the United States will put the corona virus in the rear-view mirror.#

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