#26 - Politics vs. Perception: Don't Get Lost in the Sauce

Author

Graham Schroeder
October 04, 2024

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This week we will dive into a September public Freedom Fund portfolio recap and why you should zoom out when forming a perception on America’s future instead of getting lost in political theatre.

Market Recap

  • U.S. Dockworkers Strike Halts Nation’s Shipping

    • The week started with U.S. East Coast and Gulf Coast dockworkers launching their first large-scale strike in nearly 50 years. The strike halted about half of the nation's ocean shipping. This was expected to disrupt the flow of essential goods like food, construction materials, and automobiles across ports from Maine to Texas. Had it continued it would have cost the economy billions of dollars each day.

    • U.S. dockworkers agreed to return to work Thursday night after port operators sweetened their contract offer to a 62% pay increase over six years.

    • The dockworkers' strike could have created opportunities for companies in the logistics, railroad, and air freight sectors as businesses would need to look for alternative shipping methods.

  • Snack King PepsiCo ($PEP) Acquires Siete Foods

    • $PEP announced its acquisition of Siete Foods, a Mexican American food company specializing in grain-free tortillas and snacks, for $1.2 billion. This marks Pepsi’s first major food acquisition in five years as the company seeks to diversify its portfolio with healthier, dietary-friendly options.

    • Siete Foods, founded in 2014, has expanded its product range to include tortilla chips, taco shells, and seasonings, with a focus on catering to dietary restrictions. The deal is expected to close in early 2025, pending regulatory approval.

    • Siete chips paired with Costco’s $COST Jack’s Cantina Salsa is one of the most underrated snacks on the open market. Opinions on social media this week sent harsh messages to PepsiCo that altering Siete’s recipes or ingredients would alienate loyal customers. If PepsiCo is smart, they’ll listen to this feedback and preserve what makes Siete special to its fanbase.

  • How Will Israel Respond to Iran’s Recent Attack?

    • Israel’s response to Iran’s recent missile barrage on Tuesday is expected to be more robust than past reactions. The U.S. is hoping for restraint, Israel seems determined to strike back harder given Iran’s recent aggressive actions.

    • Any Israeli attack on Iran’s nuclear facilities or oil infrastructure would significantly raise the stakes, potentially leading to larger missile barrages or terrorist attacks orchestrated by Iran, as well as pushing Iran to accelerate its nuclear program.

    • A major escalation involving Israel and Iran would impact global markets, particularly boosting defense, energy, and cybersecurity sector stocks.

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September 2024 - Freedom Fund Recap

  • Portfolio Recap

    • Portfolio Value: $20,009.83

    • Dividends Received: $70.71

    • Total Return Since Inception: 14.28%

    • This month I continued to increase my positions in $EVLV, $AXP, $APLE. Weekly I am consistently adding more to my $SCHB position to build its % within the Freedom Fund. I also added a new position $TER - Teradyne.

Freedom Fund Background: I created the Freedom Fund as a public brokerage account back in October of 2022 to share that anyone with a social security # and a bank account can begin their investing journey by investing a couple hundred dollars a week. Every week and month I post on X (@GrahamInvesting) public updates about the purchases, exits, dividends, and growth of the fund if you want to follow in real time. The biggest obstacle people have to investing is just getting started so I decided to start a new account at $0 to start from nothing with you.

Resilience of the U.S. Economy Across Political Cycles

With the U.S. Presidential election almost a month away tensions, emotions, and opinions are high. While political debates often focus on who’s in charge, the truth is that the U.S. economy has proven resilient against any single administration. In life and personal finance, success isn’t determined by emotions. It’s by to zooming out and looking at the facts. The U.S. economy, much like personal finances, thrives on minimizing bad debt, investing in good assets, and maintaining long-term stability. This section is aimed to remind people to stay focused on the things within their control during uncertain times, even if macroeconomic trends are out of their control. Let’s examine few key indicators that reveal how the economy continues to grow and adapt, regardless of political leadership.

S&P 500 Growth

  • The S&P 500, which reflects the performance of the largest U.S. companies, has shown consistent long-term growth despite changing political administrations. The market has grown regardless of whether Democrats or Republicans were in power. Since its inception, the S&P 500 has returned an average of about 10% annually, with fluctuations caused more by economic cycles and global events than by political shifts.

Median Household Income

  • Median household income has grown steadily in the U.S., but its trajectory is often more influenced by economic conditions than political parties. For example, median household income rose from about $46,000 (adjusted for inflation) in 1980 to over $68,700 in 2020 despite numerous shifts in political power. Factors like inflation, cost of living, and industry trends play a larger role in income growth than short-term policies.

Median Home Sale Value

  • Housing markets are primarily shaped by supply and demand dynamics, interest rates, and regional economic conditions. Over the past few decades, median home sale prices have risen steadily, often independent of the party in power. For instance, median home prices have jumped from $120,000 in the 1990s to over $400,000 in 2024. Housing values are influenced by interest rates set by the Federal Reserve and demographic trends, such as millennials entering the market.

Federal Debt: Public Debt as a Percentage of GDP

  • Public debt as a percentage of GDP (amount of a country's debt in relation to the size of its gross domestic product) has risen steadily over the decades regardless of which party is in office (currently ~120%) . This is a long-term structural issue that transcends short-term policy changes. Below are some key trajectory notes:

    • 1980s (Reagan Era): Public debt was around 30% of GDP but began rising with increased defense spending and tax cuts.

    • 2008 Financial Crisis: During the financial crisis and Great Recession, debt surged, exceeding 70% of GDP under George W. Bush and Barack Obama as government spending increased to stabilize the economy.

    • Pandemic Spending (2020): Federal debt ballooned over 120% of GDP by 2024, driven by pandemic recovery packages under both Trump and Biden administrations.

National Debt Growth by President

  • National debt growth tends to increase during both Democratic and Republican administrations. The reasons for debt growth are often tied to economic downturns, wars, or crises rather than the policies of a particular president. Here are some examples:

    • Reagan (1981–1989): Debt nearly tripled due to tax cuts and increased defense spending, rising from around $900 billion to $2.6 trillion.

    • George W. Bush (2001–2009): Debt increased from $5.7 trillion to $10.7 trillion, due to tax cuts, the Iraq and Afghanistan wars, and the financial crisis.

    • Obama (2009–2017): Debt grew from $10.7 trillion to $19.9 trillion, driven by the 2008 financial crisis and stimulus spending.

    • Trump (2017–2021): Debt grew from $19.9 trillion to $27.8 trillion, due to tax cuts, increased military spending, and pandemic relief packages.

    • Biden (2021–present): Debt exceeding $31 trillion in 2024, driven by recovery measures and infrastructure investments.

    • Links:

Long-Term Trends Overshadow Political Cycles

While presidents and political parties influence short-term policies, the long-term stability and growth of the U.S. economy are rooted in structural strengths: military power, the dollar’s global reserve currency status, protected trade routes, and relentless innovation. A diversified economy, entrepreneurial culture, and strong talent attraction, ensure resilience through global challenges. The U.S. can reduce its national debt by targeting inefficiencies, enable growth through innovation, and reforming tax policies without sacrificing its stability and growth. The enemy that is bigger than your neighbor is likely going to be the BRICS Alliance.

Conclusion: Zoom Out

When political emotions run high, it’s essential to take a step back and see the bigger picture. While our economic challenges are real, they’re far less daunting when compared to those faced by many other countries. Don’t let the headlines, social media, or political rhetoric convince you that the U.S. is always on the edge of collapse. Instead, focus on building a healthy budget, nurturing your mind and body, and investing in your personal growth through continuous learning. Prioritize acquiring assets over accumulating consumer debt, and you’ll likely feel more in control of your future. Before blaming your circumstances on any political administration, remember: when in doubt, zoom out.

The purpose of this newsletter is to encourage you and our other 77 Gazette subscribers to start and stay consistent with your personal, professional, and financial journey.

Thanks for investing your time reading this.

Disclaimer: Graham’s Gazette provides information and resources related to investing, financial topics, and personal growth for educational and entertainment purposes only. The content presented is not intended to be construed as financial advice. Readers are encouraged to conduct their own research and consult with qualified professionals before making any financial decisions. Graham’s Gazette and its creators do not assume any responsibility for the accuracy or completeness of the information provided nor do they guarantee any specific results from such use of information.