With the transition of power shifting from the Republicans to the Democrats, many are wondering how these changes will affect their investment portfolios and their retirement accounts. I do not want this e-mail to be construed as a political narrative. I simply want to point out what we know and can probably expect in the future based upon what has already happened. It does not matter who is in the White House when it comes to the markets. Our Global View Capital money managers will be watching very closely where money goes and will be doing their best to make sense of it all.
With the executive orders that were just signed, it is very likely to expect energy costs to increase. Taxes more than likely will increase to pay for new government programs. With more regulation typically comes larger government.
There are also bullish aspects to the economy already in place that cannot be ignored which are usually good for investors:
- The Federal Reserve continues to print money at break neck speed. Much of this money will find its way into the stock market. Which could lift returns?
- The housing boom is real and here to stay for a while due to low interest rates and a shortage of affordable housing.
- Low interest rates are going to continue to increase consumer spending which fuels the economy.
- There likely will be a bounce back from the pandemic not only here at home but around the world which is going to be good for business.
Obviously one of the darkest clouds on the horizon with all the stimulus that has been pumped into the economy is the possibility of inflation which has been relatively calm for a number of years.
So how does all of this affect market performance and your money? According to Ryan Detrick, of LPL Financial, going back to 1950 and looking at first year returns for all administrations, the average annual return the first year after an election is 7.32%. Of course the past is no guarantee of future performance. There were 14 negative and 17 positive inaugural years.
We are going to see some volatility over the next few weeks. We will watch closely to see if it is a trend or a short lived event. There was a sell off today due to covering margin calls, which is when a broker mandates an investor hold more cash to cover losses due to covering short positions. The Federal Reserve announced today that they continue their asset purchasing program which will keep interest rates low. The VIX, which measures volatility, rose above 30 today which indicate some volatility in the near future. At Global View Capital, we are watching your account very carefully and will make adjustments as the economic landscape dictates. Having an actively managed account at this time could not be more crucial!