Your Investments as a Result of the Election Outcome

Your Investments as a Result of the Election Outcome

November 06, 2020

During each election cycle, it's common to see surveys that ask investors, "Do you plan to make any changes to your portfolio as a result of the election?" It is only the confident, bold, and patient investor who answers, "No. I do not plan any changes."

Jason Pride, Chief Investment Officer at Glenmede, states his firm broke down market performance by presidential administrations going back to 1872. They discovered the markets long-term performance, regardless of who held the White House and Congress, was no more that 1 to 2% different than the overall market average. Here is where active money management really becomes important. The policies of each administration are going to be different which could dramatically affect certain sectors of the economy. Based upon policy, a money manager will more than likely know where the economy is likely to shift and will usually find those sectors that show the best opportunity for return.

From an investor’s perspective, the election could not have turned out better. Here are several points to consider regarding how your investment might perform over the next several months and into the New Year.

~Having a divided Congress is a very good thing for the markets. The founders of our constitution were very inspired with all the checks and balances built into the system. A divided congress means that radical behavior by either the House or the Senate is not likely. The market likes the stability this provides. This will help keep everything in check from increased taxes to regulations which can be economic killers. We are seeing how well the market likes this by market results over the last several days post-election.

 ~The economy is still in the reopening phase and has no place to go but up. As the economy reopens and people go back to work, it more than likely will only push stocks higher. The fourth quarter has historically been the best quarter for market returns.

 ~We will see a vaccine in the next few months which will give people confidence to return more to normal. COVID is just one more disease we are going to have to learn to live with just as we do with many other viruses. It is not a reason to lock down the economy.

 My personal opinion is that the near future looks very good for investors. In a crazy year like 2020, I am still hopeful for double digit returns by years end.

 I knew it would be volatile leading up to the election. I also knew we did not want to be sitting on the sidelines after the election. I think we were right in both instances. If changes are necessary, our money managers will make them.

2021 has the potential to be a great year!!