“To summarize the summary: anyone who is capable of getting themselves made President should on no account be allowed to do the job.”
― Douglas Adams, The Restaurant at the End of the Universe
The election happened, and though it appears that Biden is being crowned as the winner, Trump being Trump, has not conceded the race. But he has announced a number of legal challenges, recounts, and audits. Eventually, the Supreme Court of the United States is likely to decide who gets the ball.
Some are worried about what happens now as far the economy is concerned. One friend of mine asked, “Is a Depression coming?” This is letting political rhetoric control rational decisions. If your view is that all Democratic proposals will cause an economic downturn, maybe some context will help.
First, the Republicans are likely going to hold the Senate and has made advancement in the House. So that is a divided Congress to begin with. Raising taxes and other initiatives will be hard to implement without cooperation from the other party. So, don’t expect any drastic changes right away.
Additionally, Democrats did not get the ‘Blue Wave’ they expected, so a moderation in agendas is likely. The same thing happened to Obama in 2008. His party controlled all 3 branches of government when he was elected. He got big initiatives through, like the Affordable Healthcare Act, but lost Congress to a ‘Red Wave’ and ended up with less bold policies after that. One person told me that ‘Obama ended up being a moderate’ as a complaint. Remember, the stock market made new highs under Obama and with the Republican party, in control the Congress.
The government will likely try to put through another economic stimulus bill, but that might be delayed until after the Inauguration next year if Trump and the Democrats don’t come to an agreement. Not having another stimulus bill will be an issue if our economy stalls due to a Coronavirus resurgence. That could have a negative effect on stocks. Will we get a drop in the market? History says yes due to a change in the President, any President.
We still recommend letting data, not *politics* control your investment decisions. Your party winning or losing should not control your portfolio.
The Economy gets better and better.
On September 2, the S&P 500 index4 closed at 3580.84, a high for the year. On October 26, the market pulled back to 3271.03 for a drop of -8.65% from the September high. As of November 12, the index closed at 3554.16, approaching the previous high. The index is up 10% year to date. (This is really great since the index dropped to 2237.40 on March 23rd, or -33%.)
A possible vaccine was announced which caused a bounce in the index. Of course, as I have said in previous columns, not all of the market is participating in this recovery. The laggers are improving. So, that is the equity market. What about the actual economy? Consider the following data points:
⦁ Non-farm payrolls increased by 638,000 and the unemployment rate fell to 6.9% from 7.9%. Economists surveyed by Dow Jones had forecast 530,000 and 7.7%. (So, this was a really good beat.)
⦁ The manufacturing PMI are increasing. (Markit is at a high of 56.9)
⦁ Services index (ISM PMI & 85% of our economy) fell to 56.6 from 57.8 but solidly in expansion mode. Above 50 is considered expansion.
⦁ Factory Orders continue to rise at 1.1% in September.
I didn’t include any charts this time, however, nearly all show a V shaped
recovery happening. Earnings season is wrapping up without any devastating announcements being made to future earnings. The market is comfortable with the political and economic situation. We are short term bearish on the market and long term bullish and always, “Bullish on your Financial Future!”
Sources Citations Bibliography:
⦁ Analogy for who gets to be President of the USA.
⦁ The guarantee’s we refer to are backed by the full faith and credit of the Insurance Company providing the guarantee and its claims paying ability. These guarantee’s do not carry protections from FDIC and are not bank deposits and are not insured by any federal agency. Some policies lose cash value over time, leaving the investor with only the income guaranteed by the Insurance Company. Review the company issued illustration and the benefit terms carefully and it’s credit ratings before investing.
⦁ This is assuming an income through retirement as the primary objective.
⦁ The SP 500 Index… is a market-capitalization-weighted index of 500 of the largest publicly traded companies in the U.S. – Investopedia
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