Election 2020 Winner: China

I’m calling it right now: China will be the big winner of the 2020 U.S. presidential election. And you didn’t even know China was on the ballot, did you?

Don’t feel bad; I suspect this is news to a lot of people. But it looks to me like China is already taking a victory lap. The yuan is surging. China’s retail sales and consumer spending are very strong — overall the Chinese economy grew 4.9% in the third quarter. And here’s the crazy thing: China is actually expected to grow this year! 

Sure, it’s just 1.9% growth, but contrast China’s growth with the United States and Europe. The U.S. is on pace to put up a negative number… but our -4.3% is a lot better than Europe’s -8.3%. Yeesh. Those are both ugly numbers. Good thing the Fed and Congress bought us a little growth… for $4 trillion dollars!

You might be wondering what China did to stage a pretty remarkable economic recovery from the coronavirus pandemic. Maybe it’s because the Chinese government is, oh I don’t know, lying? 

The fact is China’s government can pretty much say whatever it wants about its economy. There’s no way to check, no independent verification is possible for that closed economy.

Anyway… 31 million have already filled out a ballot for the election. It’s pretty remarkable, roughly 20% of the total vote collected in the last election. And it’s easily a large enough sample to call the popular vote. The media is saying that it is known that the early ballots are mostly from Democratic voters. It is unknown which candidate is currently leading, but to that, I say, “C’mon man. I didn’t just fall off the turnip truck… whatever that means.”

Seriously though… an event this significant, with so many dollars at stake, and you’re telling me nobody’s doing some advanced scouting? What was it H.L. Mencken said about the intelligence of the American public? “Nobody ever went broke underestimating the intelligence of the American people.”

Sigh. 

I’m not naming names here because predictions like that are exactly the kind that come back to haunt. But I will say the stock market is clearly and unequivocally telling us that there is a softer stance on China on the horizon.  

LeBron Had It Right (So Did Carville)

The story goes that during the 1992 presidential campaign, James Carville cemented his place in strategist lore when he wrote Clinton’s talking points on a blackboard. There were three, and number one was “It’s the economy, stupid.” 

It’s kind of ironic that LeBron James was vilified for speaking the same truth back when China was flexing on Hong Kong. We all want to take our moral stances and take up for the trodden upon. But at the same time, China accounts for as much as 20% of NBA revenue. That’s a lot of yuan in LeBron’s pocket… and morals don’t pay the bills.

The powers that be here in the U.S. are very well aware of how important the Chinese market is to the U.S. economy. Tech might get the headlines about the very large percentage of revenue that comes from China. But Starbucks, Nike, GM, and Harley-Davidson are also very dependent on their Chinese businesses.

On a personal note, I support Trump’s hardline stance on China 100%. I’d like his actions there to be more consistent, but philosophically, it’s the one policy that garners widespread popular support for him. That’s not necessarily true for tech. Would it be a shock if some Silicon Valley thug told the White House, “That’s a nice presidency you got there… sure would be a shame if something happened to it.”

Interesting that Trump’s Justice Department just filed an anti-monopoly suit against Google. Coincidence? You tell me.

China as a Leading Indicator

Why is all this important? Because China is the growth engine for the entire world. Chinese demand is the single most significant factor in the price of oil, the price of copper, probably even in the price of iPhones.

PRO TIP: If you want to know where the U.S. economy will be in six months, just check to see where the Chinese economy is right now. Lag time is right around there. 

China’s economy is doing quite well. That’s a big reason why U.S. stocks are rallying. And it’s why Wealth Advisory subscribers already have a 20% gain from our September Feature Recommendation, Freeport-McMoRan (NYSE: FCX).

Freeport-McMoRan isn’t really the poster child for growth stocks. But then, analysts don’t often say a company is going to triple its earnings over the course of a year. But that’s what they are saying about this company. From $0.35 a share this year to $1.52 next year. That puts the forward P/E at 15. Not bad at all.

If you want to see what we are recommending to our readers right now, just click here.

Until next time,

Briton Ryle

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.