Election Mayhem and the Markets – Our Thoughts
Is this really our new world that we are all witnessing? Given what we see on the nightly news, the venom we read on the internet, and the level of acrimony that exists between the two warring sides of the 2020 election, you’d think the end of times are at hand.
Listening to each side with less than six weeks to go, one would assume they live in different countries or even on different planets (supposedly there is life on Venus!)
But in reality, they are watching different cable news channels and reading different websites in an unyielding effort to achieve confirmation bias. It’s as if one cable news channel is always right, and the other guy is always wrong. Does anybody really believe that?
If two cable channels with entirely opposing views are wrong, mislead, or purposely avoid sharing information at least 30% of the time (pick your own estimate, it’s as good as mine), then what portion of their programming is false? Fact checkers to the rescue…well unless they too are biased!
So, our options are these…we can be partially informed, uninformed, or misinformed…what a choice! How is the average voter supposed to decide?
One Thing is Certain…
…Financial markets hate uncertainty.
Polls are telling us something close to what happened in 2016, which is to say they are a function of the assumptions made by pollsters. Who is being sampled? What are they being asked? Who is willing to sit through a polling call? How many questions are being asked? Are the people being polled registered voters? Are they likely voters? Are they telling the truth about who they will vote for? How are they going to vote? When are they going to stop counting the votes? Who gets a ballot mailed to them? What ballots are going to be rejected?
Our job at Modernize Wealth is to try to pick the bones out of all of this…and anticipate how the markets are going to react. Really?
Guided by History
History, as is often the case, gives us clues. We have endured pandemics before, as well as contested elections. Rutherford B Hayes won a heavily contested election in 1876 after losing the popular vote to Samuel J Tilden but winning the electoral college after…wait for it…disputed ballot counts. Sound familiar?
We are spending a fortune to overcome the pandemic, and it may yet bankrupt our nation. We’ve been there before. The US was bankrupt after the Revolutionary War, Civil War, the Panic of 1873, 1893, 1896, 1907, 1910, after World War I, the Great Depression. Too long ago? Some of you may remember 14% unemployment and 21% interest rates in 1980? We should easily recall the Tech Bubble bursting, and the financial panic of 2008? Yet how soon we forget.
So… What Do We Plan to Do?
The team at Modernize Wealth is planning to deal with this potential mess and mayhem by hedging our positions as we get closer to the election to preserve wealth for our clients; then removing our hedge positions as the fog of election mayhem subsides.
We need to recognize that investments will be significantly affected by the eventual outcome, which may not be known for some time after the election. Tax policy, regulations, the Courts, labor policy, foreign policy, education policy, not to mention domestic security are going to be affected by the outcome. Throw in the wild card of COVID-19 vaccines and new treatments, and you’ve got a perfect storm with no clear way to stop it.
Our aim in the coming months is to ride out this perfect storm; to plan for wealth preservation and to look for opportunities when they invariably surface. Caution: this upcoming ride will not be for the faint of heart or the inexperienced investor.
Buckle up…2020 has been a year unlike any other….but its not over yet!