2020 Presidential Election: one week away in the markets
The 2020 presidential election is one week away. Though the final election results might be more than one week away. Fatigue of the upcoming election, pandemic, uncertainty in the world, masks is all around- it’s a lot to take in. Election fatigue should be the first to be resolved. There is a possibility that election results will be clear based on certain same day state results such as Florida. If Biden carries Florida the pathway for Trump would be extraordinarily difficult.
This week the stock market is “woke” to the pandemic surge! Big declines this week as beds in ICUs fill, a notable public health concern, all while overlapping the final days leading up to the election. Our hope is that the final result is known sooner rather than later and Americans and the markets alike can then take a collective deep breath. GDP growth rates for the 3rd quarter should be available soon with expectations in the neighborhood of 30% after a 2nd quarter decline of 30%.
Markets still reflect some optimism about the election outcome and Wall Street is now all in on Biden. Either way federal fiscal funding spigots will open focused on financial assistance similar to the CARES act. Biden has a plan and an agenda. Trump is more of the same as the last 4 years. The Republican platform for 2020 was unchanged from the platform of 2016 for the first time since the beginning of the Republican party in the mid-19th century. To quote the American Enterprise Institute, a conservative think tank, on proposed tax policy:In 2021, Biden’s proposals would increase taxes, on average, for the top 5 percent of households and reduce taxes on households in the bottom 95 percent. In 2030, Biden’s proposals would increase taxes, on average, for households at every income level, but tax increases would primarily fall on the top 1 percent of income earners.
The American Enterprise Institute cannot analyze Trump’s tax plan because he does not have one. Any tax increase under Biden, including a significant increase in corporate taxes, will be offset by fiscal stimulus, says Goldman Sachs. Of course, policy statements do not often match reality in the sausage making of legislation but it is important to keep an eye on this legislation as it is proposed and as it moves forward.
There is a surge in new cases of Covid-19, it is important to know that the SF Bay Area is maintaining a muted positivity rate. My wife and I were tested before a birthday with close friends that we celebrated at a restaurant dining outdoors in a totally separate patio. It is easy to get tested in SF. We made an appointment online and did a drive thru at 12:30 on a Tuesday and received our results the next morning. We had no symptoms so we helped to keep the positivity ratio low. It should be this easy in all communities.
A stock market rule is “buy the rumor, sell the news.” Hopefully with all the dread of the election, all the distress turns out to be much ado about nothing? Always the optimist.
Stay safe and VOTE!