While we are still waiting for the results of the 2020 election, changes in presidential administrations have rarely led to material fundamental changes in how the U.S. economy works in the long run. While not certain, it appears there is a greater possibility of a split control of Congress regardless of the outcome of the presidential race. The S&P 500 index rallied 2.2% yesterday on the view that “gridlock is good.”
Despite a positive seasonal trend for stocks, a spike in volatility would not be surprising between now and the end of the year, particularly as investors parse strident rhetoric, the timeline for resolution, and the impact of judicial challenges along the way (see chart below). We also have upcoming debt ceiling negotiations in December, rising COVID-19 cases globally, and the potential for stiff negotiations for a front-loaded fiscal package in 2021.
What should investors do in this period of electoral uncertainty? Be patient and staying focused on long-term goals remains the best course of action.
If you have any questions or want to have a conversation about the market or your portfolio, please contact Liz, Ed, Fred, Scott, Tyler, or myself. Your Sendero team is ready to help.
Amaury de Barros Conti