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Post Election Clarity......sort of Thumbnail

Post Election Clarity......sort of

After a contentious election season, the fog is starting to lift, and we have a bit more clarity on what to expect in 2021.

Despite the chaos and uncertainty surrounding President Trump’s refusal to concede, the market is celebrating the outcome and pricing in a Biden victory with a divided Congress.

The market views this outcome to be favorable as it:

  • Blocks a liberal mandate and forces compromise.
  • Increases the likelihood of a bi-partisan infrastructure bill.
  • Allows tax policy to remain status quo.
  • Provides less resistance to big tech.
  • Brings us back to the global stage as strategic trading partner.
  • Ends unnecessary noise and distractions coming out of the White House. 
In addition, the encouraging news on the vaccine front is creating optimism that companies will resume capital expenditures and strategic investments which is a positive for jobs, consumer spending, and economic growth.

Finally, interest rates are likely to remain low, and a terrible 2020 for corporate earnings sets the stage for impressive year-over-year earnings growth.

Areas of Concern

While the election outcome and vaccine news are positive and provide reason to be optimistic, we need to be mindful of the following:
  • A second round a fiscal stimulus is needed and a divided Congress is likely to delay the process.
  • We are still in a hostile political climate with headlines being driven by the extremes.
  • The Georgia runoff election could result in a unified government. While this would be good for stimulus hopes, this would likely stoke fears of a liberal mandate and increased taxes.
  • We are still not out of the woods yet with COVID-19, and a winter surge could very well bring another global lockdown which would compromise 2021 growth expectations.
  • The Federal Reserve has exhausted much of its ability to stimulate growth.
 
What Are We Doing?
 
  • For clients who are funding portfolios with cash, we are being cautious with the implementation and staging the investments over a 6 to 12-month period.
  • For clients with known liabilities – living expenses, tuition bills, down payments – we are holding the funds needed in cash or cash equivalents.
  • We are making sure clients have the proper international diversification to include portfolios with exposure to Non-U.S. companies domiciled in developed economies as well as emerging markets.
  • For fixed income (bonds) we favor high quality bonds to ensure safety and to be a non-correlated asset to stocks.  

 
I understand this has been an unsettling time, so please reach out with any questions or to talk about the markets and your portfolio in greater detail.