Election 2020: What it could mean for Investors

Webb Financial Group

This is a year that's tested the resolve of investors like never before. The panic and uncertainty associated with the coronavirus disease 2019 (COVID-19) pandemic sent equities screaming lower during the first quarter, with the S&P 500 losing over a third of its value in under five weeks. But, following the quickest bear market decline in history, was the fastest rally on record. It took less than five months for the S&P 500 to go from a bear market bottom to new all-time highs.

 

Volatility has become a staple of 2020 - but that's not necessarily a bad thing. Even though wild vacillations in the stock market can be worrisome and unnerving, they also open the door for long-term investors to buy into great stocks at a discount. Despite the stock market hitting new highs recently, value and opportunity still abound for the patient investor.

Regardless of the election, interest rates are likely to stay low for a long time making it a good time for borrowers. Given that the Fed is going to keep buying and supporting the bond market, it's hard to see interest rates going up anytime soon — probably not before we get back to a fully open economy.

 

If you are considering buying a home or refinancing, now is a great time to comparison shop. If you have a large portion of your portfolio in cash or low-yielding bonds, it might be a good time to discuss a long-term investment strategy with a combination of stocks for growth potential and high-quality bonds for wealth preservation.

What's ahead?

Given the pandemic, passions surrounding this election, and uncertainty about how and when the election results may be resolved, it would not be surprising if markets become volatile.

 

There is a reasonable probability that we won't know the outcome of the election for at least a few days, and maybe a few weeks, after the election. The pandemic is creating huge logistical challenges for the electoral process, making in-person voting more difficult and causing delays in counting due to the high volume of mail-in ballots. Unfortunately, the highly polarized partisan atmosphere isn't making this situation any better. The futures markets are pricing in rising stock-market volatility moving into the elections, and we expect a messy or prolonged aftermath could extend that volatility into December and maybe even January.

 

The cause of present uncertainty may be unique, but we've been through other bouts before. For investors, the key is always the same: Stay focused on what you can control—your personal goals and time horizon, and make sure you have a plan in place to get you there—no matter what life, elections, and markets may throw at you. If you need help shaping or refreshing your financial plan, please contact your advisor.