The growing uncertainty as to whether the listed winner of our coming election will be accepted as such is starting to give the investment markets heartburn. This election is supercharging levels of unease that are going to manifest in U.S. equity markets. The potential for a challenge to the election results has grown substantially and does not appear to be going away. The fallout will directly impact the near-term outlook for investors. The solution? Proactively avoid the knee jerk fluctuations caused by this election season. In the wise words of Warren Buffet, “Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.” Keep your focus on the long-term goal rather than the short-term noise. More on this topic to come…
COVID stimulus – on again, off again, on again.
Talk about a volatile relationship. Negotiations for additional fiscal support to address COVID-19 economic fallout seem to be back on the table. Between last month and today the negotiations were on…then shelved…then back on. Don’t count on anything getting done between now and Election Day. More points of angst, most notably the filling of the late Justice Ruth Bader Ginsburg’s Supreme Court seat, make coming to an agreeable bill in this small window of opportunity pretty slim.
The Fed has literally thrown everything and the kitchen sink at the current economic malaise resulting from COVID-19 mitigation. Has it worked? As it relates to supporting asset prices, yes. Rates are so low that TINA (there is no alternative) investing is alive and well. The liquidity injected into our economy has succeeded in alleviating significant stresses on many businesses, municipalities, and individuals. For homeowners in particular, the ability to refinance their mortgages to achieve lower monthly payments has been a major boon. Increased cash flow in times of economic trouble is always a plus.
Looking to 2021.
The extra liquidity the Fed injected into the economy is not simply a short-term salve. It is grease that powers economic growth down the road. When the upcoming election and the pandemic are in the rear-view mirror, the liquidity will serve as fuel for massive economic expansion. Should an effective vaccine be produced and successfully distributed by mid-2021, the stage will be set for a much more pleasant end to next year. Hang in there, hunker down, and continue to focus on future goals.