Should Traders Be Buying on Stimulus Hopes? Maybe, Maybe Not

O stimulus, stimulus. Wherefore art thou, stimulus?

It’s the question bulls are asking this morning, albeit with considerably less Shakespearian flair. Regarding the ongoing drama in Washington, though, things have grown eerily “Macbeth-like.” In Shakespeare’s classic play, the theme of political ambition takes center stage.

And that same theme – complete with the usurping of government leadership – is prevalent today. Earlier this morning, House Speaker Nancy Pelosi called for a 17-member “standing committee” on presidential fitness, invoking the 25th amendment in the process.

For those of you that aren’t totally up to date on constitutional law, the 25th amendment deals with the transfer of power in the event that the president either resigns or dies while in office. Section 1 of the amendment states that the vice president would then become president – something that shouldn’t be news to most Americans.

Section 4, however, is lesser-known. It allows Congress to establish an independent body to determine whether the president is fit to serve. Moreover, that independent body can also help the vice president invoke the 25th amendment without the president’s consent.

Basically, Pelosi & Co. are setting up for Trump’s removal if his health worsens or he refuses to leave office.

“A president’s fitness for office must be determined by science and facts” Pelosi explained.

“This legislation applies to future presidents. With this bill, Congress upholds its responsibility to protect the Constitution and the people.”

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Alternatively, House Democrats could use the 25th amendment to bounce Biden out of office if he wins in November. His running mate, Kamala Harris, is seen by many as the real presidential candidate for new school Democrats. The problem is, she lost out to Biden in the Democratic primary.

With a Congressional committee ready to deem Biden unfit, however, Democrats could have their preferred politician in the Oval instead.

And while Pelosi claims this new committee is being proposed in the interest of political stability, the truth is that it could lead to even more uncertainty.

Which, historically, the market hates. A knock-down, drag-out fight over the election results is expected by Wall Street. A committee that forces the issue ahead of time could pull the brawl into late October as well.

For bulls awaiting a stimulus deal, though, that doesn’t really matter. So long as a smaller group of relief packages remains on the table – including $1,200 checks for qualifying Americans – stocks could keep rising.

However, that doesn’t mean investors should turn a blind eye to the maneuvering in Washington. Despite the wishes of his opponents, Trump’s health seems to be improving.

A standing committee on presidential fitness is unlikely to give him the boot for health reasons alone.

What it could do, though, is apply more pressure to transfer power to Biden if the Democrats win. Much has been made recently about mail-in ballots and the prevalence of voter fraud with mail-in voting.

Should Trump lose the election, he might cry foul, demanding that the mail-in ballots be excluded. Doing so would plunge the U.S. and the stock market into a historically uncertain state.

Which, in the end, would likely result in a bear market.

But for now, hopes concerning a stimulus package spring eternal, meaning that staying long still makes sense.

Until, of course, investors finally get some stimulus and switch to “profit-taking mode” immediately after, dumping their shares for rich post-Covid gains.

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