November 1, 2020 Weekend Market Thoughts by Matt Somberg

Dear Friend,

Happy Sunday evening. I hope you and your family are well.

With the presidential election 48 hours away, we want to share a few thoughts regarding the investment markets. As the election can be a contentious topic that elicits powerful opinions and emotions, we felt it would be best to organize our thoughts into three concise categories:

  1. What we don’t know
  2. What we think we know
  3. What we definitely know

Section 1:  What we don’t know

  • We don’t know who is going to win the 2020 presidential election. Despite what the current polls tell us, we know that polls are not always accurate.
  • We don’t know which political party will hold a majority in Congress since the Senate races in several states are very close. Therefore, we don’t know how easy or difficult it will be for lawmakers to pass meaningful legislation next year and beyond.
  • Since we don’t know who will win the presidency nor which political party will hold a majority in Congress, we did not feel comfortable making significant changes to client portfolios in an attempt to take advantage of election outcomes. There are simply too many possible outcomes happening Tuesday to make a bold portfolio move.

Section 2: What we think we know

  • We think we know that the outcome of the election will be settled in the days or weeks following November 3rd. The presidential election could likely be determined by a handful of swing states, and all votes need to be counted for a final outcome.  We expect that we will go to bed on Tuesday without knowing the winner.
  • There is a cliché about investment markets, ‘markets do not like uncertainty’. If it does take days or weeks to decide the presidential winner, we believe the investment markets will be volatile due to the uncertainty. We are advising our clients to be ready for a volatile November where markets will move daily based on the latest headline. We think we should all be prepared to accept significant market moves – both up and down - until a presidential winner is clear.

Section 3:  What we definitely know

  • We know that history is being made over the next few weeks and that many Americans feel on-edge about the election. Feeling anxious is a normal and understandable human emotion, but please remember that making significant investment decisions with your portfolio based on heightened emotions is not a good long-term investment strategy.
  • We know that the Covid-19 crisis will continue to impact our lives and economy for the foreseeable future.  Neither candidate can snap their fingers and make the virus go away. Whomever wins the presidential election will inherit an economy that has high unemployment and an overall business climate that is struggling to recover from the March and April recession.
  • We know that trying to time the investment markets - as when to get in and when to get out - has proven to be a flawed long-term investment strategy.  We know that a well-balanced and diversified portfolio coupled with periodic rebalancing, marked by buying low and selling high, is the best path for long-term investment success. Our plan is to avoid speculation on the election outcome, pay close attention to the news as it evolves, and to continue practicing time-tested investment techniques.

We appreciate the trust and confidence that you place in our firm and we value it even more during times of turmoil.  We are paying close attention to the events that will take place over the days and weeks ahead and will look to make adjustments as appropriate. 

 

Sincerely,
Matt Somberg

 

Matthew A. Somberg, AIF®
Accredited Investment Fiduciary®
Co- Founder and Principal