“Savvy investors are look beyond US elections toward the global economic recovery by betting on risky asset classes.”– Paul Ebeling
The recent US stock correction was a “risk-shedding event” that provides an opportunity during an election year.
Historically, US stocks have performed well in the runup to elections. Combined with low-for-longer interest rates, the creates a good opening to bet on risk assets.
“Use it as a buying opportunity and focus on more important underlying macro-economic fundamentals; interest rates and monetary policy.”
Equities are likely to keep outperforming bonds, where valuations are very stretched. I believe that rotating into cyclical stocks and smaller-cap companies will lead the charge due North as economies continue to recover.
Further, I expect gold to benefit from low interest rates, loose monetary policy and virus fear. And that industrial metals will outperform precious the precious Yellow metals on the back of the global economy recovery.
Looking back at the performance of the S&P 500® Index since Y 1928, the I found that the market ended on a positive note in 17 of the past 23 Presidential election yrs or 74% of the time with an average annual return of 7.1%.
“Of the six presidential election years that coincided with down markets, most had obvious explanations. In 1932, the country was in the midst of the Great Depression; in 1940, the world was on the brink of war; in 2000, the tech bubble burst; and in 2008, markets suffered fallout from the financial crisis. In other words, market performance in those years likely had little to do with the presidential election.
“This year however the results might be different because of the covid-19 pandemic but all indications look like the market is on the verge of potential gain but the magic ball is still in orbit. This is because of the just announced stimulus relief package which has been deferred until after the election, due mainly in part because of the amount of relief involved, some of which involves unnecessary pork-barreled spending.
“To me, what will be extremely positive for the President will be the soon to be announced COVID-19 vaccine where he added unbelievable creditability in his quick recovery at the risks of his own life by taking an experimental drug.
The 2020 election most certainly will have an enormous impact on the country’s direction.
“Still, markets have thrived before during difficult political times. The social and economic impact of COVID-19, racial justice protests, impeachment proceedings which have temporarily been deferred, a potentially contested election, and volatile markets have made 2020 challenging, to say the least. Yet the S&P 500 closed at an all-time high on Sept. 2 this year and within 90-days of the election of the century!
“So, will the market react positively once this election is over?
“In my opinion – yes, if the current President’s policies, focusing on employment and continued lower in interest rates plus taxes, can be continued. Even Fed Chairman Powell just said in a speech to the National Association for Business Economics, group of corporate and academic economists, the expansion is still far from complete. This is a sound endorsement of the President’s economic recovery direction,” notes Bruce WD Barren, a recognized expert in business economics as Chairman of The EMCO/ Hanover Group.
Have a healthy day, Keep the Faith!