Better Benefits, Lower Costs
The Election Market Update
The Election Market Update
It’s 2020. It would have been far too simple to wake up the morning after the election and know what the full balance of power in Washington will be moving forward. Unfortunately, some of this uncertainty will continue.
Why buck the trend in this year of years? 2020 is the year of the rat, according to zodiac calendars. Sounds about right, and we could also tack on the monikers of the year of uncertainty, anxiety and volatility. Hang in there. This, too, shall pass.
The balance of the senate will, in all likelihood, not be determined until a special election run-off that takes place in Georgia for both open seats on January 5th. Thus, it appears that gridlock will continue to dominate Washington and from a market standpoint, this is a good outcome based upon historical facts.
Markets have historically performed their best under a divided government. A divided government reduces the likelihood of broad-based changes introduced to the market environment that businesses and investors must attempt to navigate.
While 2020 is an extraordinary year, the current trials and tribulations of our great republic have all been experienced before. It’s been 100 years since we’ve experienced a pandemic of this magnitude, but it's only been 20 years since we’ve dealt with a contested presidential election. It took over 45 days for the results of Bush vs. Gore to be confirmed. The markets were volatile during this uncertainty, but this was part of a larger downward trend markets experienced as the technology bubble of the new millennium was bursting at the same time. The point is, yes, there will be uncertainty until the special election results in Georgia are tallied, but the broader trajectory of markets and the economy will depend on larger forces. Specifically, in 2020, how economies handle the COVID crisis and that script remains unwritten.
The U.S. election will, as always, give us sufficient reasons for both optimism and despair. But as investors, whether our preferred outcome materializes or not, we must keep our focus on where economic value is being created under the circumstances that occur, not on what may happen if our choice is realized.
There was one clear winner with the recent election results that was never in question. As always, diversified and long-term investors will win the day, while those focused on fear instead of fundamentals in their decision-making process will lose.
Poor election-related decisions typically only come along every four years, which might as well be four centuries in our modern-day, non-existent attention span society. We only have to rewind the clock to earlier this year to tragically highlight the fallacy of emotional-based investment decision making. On March 23, 2020, the stock market bottomed out down nearly 36%, which was also the day that investors sold more stock than any day in the history of our great nation. More people couldn’t have made the exact wrong decision at the exact wrong time, missing out on the approximate 50% subsequent recovery.
Please don’t let the election uncertainty trap snare you like the emotions of the COVID crisis that knocked so many investors off their long-term plan platform. Our job is to help build portfolio foundations soundly in the first place and hold the line when the going gets tough. Nothing has changed with that mandate due to uncertain poll results.
Events such as these do provide an opportunity to revisit your current investment allocations to determine if they are appropriate for your risk tolerance and time horizon - that is where we come in. Our strategies are designed to be "politically agnostic" with a diverse range of assets that all respond in a different manner to whatever market events manifest themselves. We are always available to discuss any details further that are specific to your circumstances.
Stay up to date on developments impacting benefits and retirement programs and visit OneDigital’s Election 2020 Hub.
Investment Advice offered through Resources Investment Advisors LLC, (d/b/a OneDigital Investment Advisors) an SEC-registered investment adviser and wholly owned subsidiary of OneDigital.
Past performance is not a guarantee of future results.