2020 Election - Market & Strategy Update

See below for the latest update from our Chief Investment Officer and, as always, reach out to us if you have any questions or comments.

Thank you,

Kirk A. Wilkerson, CIMA®

Financial Consultant, Managing Director


While we may not yet have a declared winner of the 2020 Presidential contest, we do have the needed information to begin positioning our portfolios for the year to come. As of this writing, it appears Congress will remain divided, with Republicans retaining control of the Senate. This may prove to be a more important factor than which Presidential candidate ultimately prevails. Because it is more difficult to make sweeping changes, markets have typically preferred a split congress throughout history. With a divide, business operators can more effectively move forward with their growth plans without fear of the rules changing. This preference was clearly seen the day after the election, with markets up close to 3% despite not knowing who would become our nation's next President.

Technology and health care stocks were the biggest benefactors post-election, as those two sectors were expected to be hit the hardest if Democrats came away with a sweep. This was a welcome sign given these two sectors are among our most favored investment themes long-term. 

Even if the Democrats were to take control of the White House and Congress, we believe the negative economic impact of tax hikes would largely be offset by the strength of our current economic recovery and additional stimulus. Manufacturing statistics we actively monitor are performing well in excess of expectations, driven in large part by renewed demand from consumers, coupled with extremely low inventory levels across a wide variety of industries. We believe this restocking of America will act as a tailwind for the economy in 2021, pushing earnings growth above 20% next year.

Looking back, an analysis of stock market returns during past Presidential cycles illustrates that on average, stocks have risen no matter who controls the White House. While this backward-looking analysis cannot predict whether stocks will be higher four years from now, it does lend support to our opinion that changes in political power only affect results on the margin and rarely ever change the course of the markets or the economy. We firmly believe this time is no different.

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advice offered through Merit Financial Group, LLC, an SEC Registered Investment Advisor. 

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes. The purchase of certain securities may be required to affect some of the strategies. Investing involves risks including possible loss of principal.