While only a handful of our clients have voiced their concern about the upcoming elections impact on the markets and the economy, we know the topic is likely to be on everyone’s mind. Therefore, I wanted to share my thoughts on this complicated subject with you.
In the past, my response about presidential elections and their effects on the market was:
Presidents come and go, but the markets continue to move higher over time.
Basically, markets react to presidential elections in the short-term, then return to the reality of the situation at hand. Now, I am thinking that is still true, but we must overlay the Covid-19 pandemic. In doing a little research about the 1918 flu pandemic I came across a very interesting, short article published on history.com titled, “How the US Pulled Off Midterm Elections Amid the 1918 Flu Pandemic.” I encourage you to view the full article, which is an amazing read. Here is a paragraph from it that particularly hit home:
“As scientists raced to find a vaccine, public health officials turned to time-tested methods of social distancing and quarantine. State and local officials around the country banned public gatherings, closing schools, churches, theaters, bars and other spots where people typically met in groups.”
As I started reading the article, I kept looking at the title, “the 1918 Flu Pandemic.” You could change the year to 2020 and every word would remain true.
As far as the stock market performance before and after the 1918 Flue Pandemic, the chart below explains it very well. Remember, there was a flu pandemic and we were firmly entrenched (no pun intended) in the middle of a World War. It’s also good to keep in mind that ten years later, 1929, was the start of the Great Depression.
While no one can predict who will win this presidential election, you can be sure the winner will have to deal with the Covid-19 Pandemic, high unemployment, restoring the economy, social injustice and all of the problems brought on by society. My guess is by January 2021, we will be seeing a Covid-19 vaccine rolling off the production lines and we will begin immunizing the population. While the vaccine will be good news the debate will be “who should get it first?” Healthcare workers and emergency first responders will likely be the first recipients of the vaccine. Then seniors with underlying health conditions – which this pandemic has hit the hardest – then the general population.
The stock market always looks ahead and is currently anticipating the vaccine and other anti-viral medications as the limiting factor for the economy to return to normal. As I have written many times before in my communications to clients, whenever there is great uncertainty – “Markets climb a wall of worry.” When everything seems normal, the markets tend to move sideways.
While history never exactly repeats itself, it does give you a framework for human behavior. Hopefully, I have provided a different perspective to help you think about the upcoming election, the pandemic, and the market.
If you have any questions or concerns about your portfolio, or if you would like to discuss your financial future, please contact us at 631.218.0077 or at firstname.lastname@example.org. We are still all working from home, so feel free to send an e-mail or call the office and leave a message and we will return your call as soon as possible.
Ronald W. Rogé
Chairman & CEO