The repudiation of President Trump and sweeping Democratic victory that some expected did not play out. Instead, the race to 270 electoral votes is so tight that the winner will not be declared until the record-setting number of mail-in votes (no doubt, influenced by the threat of COVID-19) are accounted for.
As of writing, the projected electoral map stands at 224-to-213 in Joe Biden’s favour. It comes down to Arizona, Georgia, Maine, Michigan, Nevada, North Carolina, Pennsylvania, and Wisconsin. Patience will be needed as the final tally could come as late as Friday as reported by some media outlets. Even then, we could see the result contested in the U.S. Supreme Court if President Trump loses, potentially dragging out the event.
What does this mean for your portfolios?
Prior to the election, we wrote that the global economic recovery happening right now, should continue over the next 12-to-18 months regardless of who is President of the United States, barring a disastrous rise in COVID-19 cases or some other unforeseen catastrophic event. As we wait for the definitive result, we generally still feel the same way. In the end, the election matters less as policy moves will be muted in a balanced government (radical policy shifts seem unlikely).
Global economic policies should remain supportive (ultra-low interest rates and unprecedented fiscal spending), providing the type of environment for equities to outperform fixed income over a reasonable time frame. We remain cautiously positioned for this scenario and do not anticipate a material change to our positioning over the short term.
While we wait for the U.S. election to play out, it’s important to remember that it is a single event (albeit a big one). The complete picture that is our investment thesis is much larger and goes beyond one country and one event. Our strategy takes into consideration a much longer time frame and many other variables (geopolitics, economics, sector, and even individual investment analysis to name a few).
We do expect volatility to persist – it’s interesting to note that current volatility levels are more “normal” relative to long-term averages, especially when compared to the uncharacteristically low volatility we experienced prior to the pandemic.
Additionally, the latest COVID-19 developments (over the short term, the economic recovery remains more of a health challenge than one of government policy) and U.S. policymakers’ inability to agree on details for the next fiscal support package (unfortunately we’ll likely see less support for the American people over the short term) continue to be a major source of unwanted uncertainty.
Please stayed tuned. We’ll be diving deeper into the election result. As we find out who the President of the United States will be come January 20th, 2021, we’ll provide further analysis of what to expect now and over the long longer term.
The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.