November Economic Commentary

While the results of this year’s ballot and the November economic outlook may seem intertwined, history provides instructive lessons on the key ways they are not — especially for individual investors.

Markets are relatively unflustered, particularly over the long-term. The past 100 years tells us that markets reward long-term investors with positive results, regardless of what party was in office.1 

Every election is important

Most people are laser-focused on the next occupant of the White House, but the reality is local and state results may have more of an impact on short- and long-term policies that affect day-to-day finances. Furthermore, if Congress remains split — The President will be forced to compromise.

Any returning or new administration may address taxes, health care and retirement contributions, among other policies. As a new Congress is sworn in and state legislatures return to work, we will be closely monitoring changes that could affect investments.

A delay may happen, and has happened before

We’ve gotten used to immediate election results, but it’s not always been the case.

In four elections, including: 1876, 1888, 1960 and 2000 — close margins and contested results have slowed the final outcome.2 With the fierce competition in 2020, Americans may simply have to wait. “If you think you’re going to have an answer on November 3, you probably will be disappointed,” says Mark West, National Vice President of Business Solutions for Principal. Swing states, mail-in ballets, COVID-19 and other factors could drag this out more than what people would like.

The delay may be compounded by two factors. First, no one knows how COVID-19 may impact in-person voting. Initial results suggest an increased amount of absentee and mail-in ballots. Second, each state is responsible for certifying its own results on its own timeline.

In the short-term, markets may respond to the uncertainty with volatility.  "This may be one of the most anticipated elections in modern history, coinciding during a time of heighten civil unrest, along with a global pandemic," said G. Ward Keever, IV, President & CEO of Covenant Wealth Strategies.

Once the markets move past any short-term reaction, long-term fundamentals will weigh more heavily on the path forward. To keep a balanced perspective, we recommend that you Contact Us with any specific questions about your investment strategy or financial planning needs. 

Sources:

  1. Bloomberg, Principal Global Asset Allocation
  2. https://www.smithsonianmag.com/history/rigged-vote-four-us-presidential-elections-contested-results-180961033/

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.