Client Portals

Four Months Until the Election4 min read

Balancing media, anxieties and patience

Jul 22, 2020 - John Osbon ( 6 mins to read)

John Osbon

We are now less than four months away from the Presidential election on Tuesday, November 3rd. Our nation’s challenges with accelerated wealth inequality and climate change are larger than any single party’s political agenda. Like the others, this one is likely to be decided quickly, which means we will know the results in the middle of the night.  In chaotic times, the regularity and predictability of US elections in this country can be comforting to investors. In addition, in the middle of a pandemic, our two-party system offers both tradition and opportunities for change.

Presidential elections are routine

The uncertainty surrounding elections can be daunting, but it doesn’t need to be that way. Remember, your own perceptions and political preferences can be quite misleading. For example, at this time in 2016 the US equity markets were in the midst of a major pullback and the idea of a Trump presidency was an absurd thought to many (most). Now, a Biden victory looks likely according to many polls and even the betting site Predicit.org.

To add to the election cacophony, both sides say “stocks go up when my party wins the presidency”. Democrats cite the Clinton and Obama years. Republicans cite the Reagan and Trump eras. There is little evidence to support either case as there are far more factors in play than the political party or the particular person. Both have their faults and merits, blame and credit. There is no dominantly convincing evidence that Republican or Democrat leadership leads to broadly improved investment results for major US companies. Further obscuring the issue is the question of which party controls the Senate and House. Looking out four years from here to 2024, we will likely have a new generation of leadership emerging, as most established politicians today are well into their 70s.

The US has a long history of complicated and ugly politics. We’ve elected wartime presidents in the past. Abraham Lincoln and Franklin Roosevelt are the most commonly cited examples. Roosevelt’s election took place during a world war. We are in a very different type of war today (if that’s what you want to call it).

Two election factors have been introduced

This election may well have the first virtual conventions. The Democrats have aggressively embraced the idea for safety reasons. They are urging delegates not to attend the convention. The Republicans are taking the opposite approach but finding it very difficult to find any place to assemble thousands of people and are unwilling to pay insurance in case attendees die.

Foreign hackers are clearly here to stay. It’s common knowledge that Russia is now the lead disruptor but how successful they are is a matter of debate. They appear to disrupt for the sake of disruption. Chances are that they do not have meaningful control over the final result. China and Iran also show up on the suspected hacking interference list. No surprises there.

Investing and politics

Whether you are allocating cash or shifting an existing portfolio, the Presidential election cycle challenges everyone. It’s good to know the established facts and to be aware of the new facts. There are always new facts. One new fact is that taxes are going up regardless of who wins. Biden isn’t the only one saying so. Many Republicans feel the same way. The new facts fuel media speculation and try to convince us that it is acceptable to let politics dictate our investment policy. Politics and investment policy do not mix well. It’s useful to be aware of politics, but investments should not be driven by political coin flips. It’s simply not possible to know with any certainty the outcome of the upcoming US election.

American Technology continues to gain

Whoever wins in November will continue to protect our country’s crown economic jewel, which is our substantial lead in technology. Visa issues are a real threat to US businesses since we’ve been home to the world’s best and brightest innovators for many decades. Today, there are emerging leaders in international technology markets. International markets are often dominated by mining, energy and financial stocks. Today we’re seeing the rise of innovative international companies like Sea Limited in Singapore (payments and e-commerce) and MercadoLibre in Brazil (also e-commerce). Shopify (e-commerce) very quickly rose to the top spot in Canada’s stock market over the last year.

We believe that technology will continue to lead the way in every continent. No American president is going to want to jeopardize the US’s position in technology and innovation. There is a $100B five year bill in the works to support US technology research and innovation appropriately named the Endless Frontiers Act. Although our politicians take antagonistic steps, they are all keenly aware of the value of the US’s role in world innovation.

Header image via fivethirtyeight.com, The Invisible Undecided Voter.

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