We’re all familiar with how long of a year it’s been, so we’ll spare you from having to rehash the drama. Instead, let’s look forward now that the election is behind us (mostly). Let’s move past 2020.
First Trust is a fund company we’ve utilized in choosing investments. They have some great funds and provide insightful economic commentary to us. Below we’ve paraphrased a recent First Trust publication and listed eleven things we’ve learned since the election. All eleven will have implications for 2021 and beyond.
What we’ve learned since the election:
1. The pollsters were horribly wrong again. They had four years to fix the problem and now there will be even less confidence in polls going forward.
2. The close election shows American voters do not want a radical shift in economic policy.
3. President Trump is pushing back against election results with court cases, and recounts will be automatic in some states because of the closeness of the results…and odds favor a Joe Biden Presidency for the next four years.
4. It appears that Republicans will have at least 50 seats in the US Senate. The outcome of two runoff elections in Georgia, taking place in early January, will determine the final Senate make-up and it appears Republicans will win at least one of those. Because Dems will not have control of the US Senate, we will have a divided government, which is typically good for the stock market.
5. Democrats lost perhaps 10 seats in the House of Representatives, but still retain a majority. This result is causing the moderate wing of the Democrat party to push back against their more progressive members.
6. This means that a major tax hike, the Green New Deal, Medicare for All, and Supreme Court “packing” are probably off the table. A Biden Administration will generate more rules and regulations, but federal courts and the 200+ Trump judge appointees during the past four years are likely to make sure agencies and departments stick to their legal mandates as passed by Congress
7. Expect Congress to pass a stimulus bill in the lame duck session, but it will not be the $3 trillion that Speaker Pelosi and the Democrats were pursuing before the election.
8. Expect some sort of infrastructure spending package, passing with bipartisan support. Because President Biden will need to get some sort of tax victory, look for an increase in the itemized deduction for state and local taxes.
9. Trade wars are off the table, however, it will be hard for a new White House to justify going soft on China or for reversing progress made toward peace in the Middle East.
10. The economy continues to grow with productivity up 4.1% from a year ago. About 90% of S&P 500 companies report revenues are better than expected, and costs have been cut as they have adapted to challenging times.
11. Although layoffs remain high, a record-breaking 12 million jobs have been added in the past six months and the unemployment rate fell to 6.9% as of 11/6.
Positive Conclusion
With the good news of Pfizer’s 90% effective Covid vaccine yesterday the stocks that have struggled have surged ahead, continued low-interest rates will enable companies to expand, governmental fiscal policies are not likely to change in any major way, the likelihood of more stimulus, and with the entrepreneurial power of the U.S economy the stock market may continue to make new highs.
We remain mostly invested in client accounts with cash ready to take advantage of any overly emotional swings in the stock market.
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