If everything stays generally stable from today until election night, Donald J. Trump will win his reelection bid. And that of course will have significant implications for Nokia (NYSE:NOK) and the future of Nokia stock.
As you know, President Trump has reversed years of American corporate and political complicity regarding selling the soul of this nation to communist China. For once, the Chinese and by deduction NOK rival Huawei have felt some heat, which has contributed to this year’s Nokia recovery narrative.
After watching much of the Republican National Convention, my radar picked up what very few people are willing to acknowledge. President Trump is steadily gaining momentum by repeatedly going to a well that has served white American politicians very well indeed.
Back in the 1988 presidential race, George H.W. Bush’s campaign manager, Lee Atwater, urged the then-Vice President to persistently broadcast harrowing images of Black criminal Willie Horton, who had assaulted a white couple. In a move which Atwater admitted to in a deathbed apology, the campaign manager deliberately crafted an image of “racial danger” to woo white voters.
Well, with President Trump’s constant blasting of the “China virus,” along with I’m sure deliberately muting Asian presence as much as possible at the RNC, he conveyed a very clear racial danger message to the white electorate: the Chinese are coming after you. And this message will stick, according to data from the Pew Research Center.
Personally, I fear that a large swathe of the American voting public don’t understand nuance. So, to the Korean kid who’s about to get beaten up, I’m sorry. Hopefully, you have some good health insurance. But if you’re thinking about investing in Nokia stock, the backdrop is looking favorable.
A TrumpWin Not Guaranteed for Nokia Stock
In addition, our own Will Ashworth discussed industry-specific news that should bode well for Nokia stock, at least in the near term. First, the telecommunications equipment provider received a favorable ruling from German courts over its dispute with Daimler (OTCMKTS:DMLRY) regarding alleged infringement of mobile-technology patents.
Second, NOK impressed with its second-quarter earnings report. Not only did it beat per-share profitability expectations, it transitioned from free cash flow negative to positive. Naturally, these are steps in the right direction for Nokia stock.
However, the telecom firm could be in for a shock if President Trump loses his reelection bid. I don’t think it’s likely unless one event occurs: the stock market crashes.
Here, I’m going to have to give credit to TheHill.com’s Krystal Ball, who cited research that stated the stock market incurred mini-shocks before the October 1929 crash. Based on my analysis, I didn’t find anything statistically relevant about the mini-shocks. However, I discovered that the 1929 crash and the severe correction that we experienced in March of this year shared a 93% correlation coefficient.
What’s more alarming is that from the onset of volatility to 108 days following the bottoming of the initial crash, the 1929 implosion and our present crisis share a significant 69% correlation.
Moreover, I compared the present collapse-response dynamic to the 2008 stock market crash and the 1989-1990 implosion of Japan’s Nikkei 225 index. In both these comparisons, they average less than 21% correlation – not statistically significant.
It’s extremely eerie but history may repeat itself. Let’s not forget that in 1930, President Herbert Hoover signed the Smoot-Hawley Tariff Act against the wishes of economists at that time. Fast forward to last year, 600 companies urged Trump to resolve the trade dispute with China.
An Uncomfortable Trade Becoming More Uncomfortable
In late July, I was weakly bullish on Nokia stock, describing it as a “low-confidence idea.” Frankly, my opinion hasn’t changed much. This is one of the investments that confuses me.
With the strong positives that Ashworth mentioned, Nokia stock should be trading convincingly higher. But over the last few weeks following the Q2 report, it’s been trading flat at around $5. So, that tells me something is up.
Perhaps Wall Street is figuring out which presidential candidate has the best chance of winning this year. If so, this is a very nuanced dynamic. Firmly, I believe that Trump will win if underlying circumstances don’t change that much. But if we have a stock market collapse, that’s it – Joe Biden wins.
Based on what I see historically from the 1929 disaster, it appears that a market crash is still on the books. Further, Trump is promoting “America First” policies that are reminiscent of the protectionist sentiment that underlined the Smoot-Hawley Tariff: both support patriotism at the expense of profitability.
Just so that I’m not on the fence, I will give a 55/45 edge to Nokia stock. Nearer term, I believe the fundamentals support NOK. But just be aware there’s also a nasty harbinger lurking in the shadows.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
