Election Day 2020 is fast approaching.
I want to stay out of the political maelstrom, and won’t declare my unbridled love for either candidate. But I have not seen too much discussion on one facet of the upcoming election.
There is a possibility we may not know the results of the election for weeks, and possibly longer.
What will happen to markets if this becomes a protracted problem?
We cannot predict the future. But it seems pretty clear to the team here at Mullooly Asset Management to expect volatility before, during and after the week surrounding the election in November.
We fully expect fifty percent of the people who voted in this election will be upset to learn the “other team” won – no matter which side wins.
So we expect bitterness, division, some potential for strife. And possibly violence. And also the potential exists for a contested, drawn-out process where we may not know the results for weeks.
Does all of this change our belief about your investments?
No.
Two points about this election:
First: Six months ago, a terrible virus began running through our communities across the land. We shutdown significant parts of the economy. This shutdown created a “man-made” recession. The stock market slumped quickly, down 35% in just a few weeks as this unpredictable event unfolded right before our eyes.
The virus was an UNKNOWN event.
The upcoming election is a KNOWN event.
Everyone knows when the election will take place. And many people probably know who they will vote for. In fact, for some, all that’s left is the counting.
As with the 2000 election, at some point the results will be known and we can all move forward.
We recorded a podcast recently walking through the tax and revenue platform the Biden campaign has presented. Here is where you can find that podcast and the transcript of that conversation. It will be worth a listen.
Second: The Bush-Gore election in 2000 was also extremely close and disputed. In the end, Bush had 271 electoral college votes, Gore had 266. This was the narrowest of tallies in electoral college history. And like Grover Cleveland in 1888 (and then Clinton in 2016), Gore technically won the popular vote but lost in the Electoral College.
Apparently, the markets did not think much of the disputed election. The S&P 500 closed at 1409 on the day after the election (November 8, 2000), down from closing at 1431 on Election Day, November 7, a drop of 1.5%.
Thirty-five days later, on December 13th, the Supreme Court effectively ended the recount process in Florida. At that point the S&P 500 Index closed at 1360, a drop of 3.4%.
Although those thirty-five days seemed like thirty-five years for me at the time, the world did not end.
In hindsight, electing Gore OR Bush seems pretty tame by today’s yardsticks. Both candidates offered centrist platforms and neither campaign ventured too far to the left or to the right in terms of political promises. And that’s all they offered: promises, from politicians.
Remember, on Election Day 2000, we didn’t know about 9/11, the war in Iraq, or a housing crisis and the “great financial recession” to come.
By contrast, this election seems far more polarizing, doesn’t it? We don’t doubt there will be volatile markets, unrest and disappointment – no matter who emerges victorious.
But we see this “period of unrest” as short-lived. We do not view this “known event” as an episode where we need to change the approach we are using to manage your long term investments.
After the actress Kelly Preston recently passed away, I was speaking with a client about the upcoming election. I pointed out how an unknown event like the virus knocked our economy completely off course. And yet, while damaged and a little bruised, we survived.
However, this election — while controversial — is starting to freak some people out. I said during the conversation, “I believe we can make THIS work.”
And I thought of Preston’s line from “Jerry Maguire,” “…I did the 23 hour Nose route to the top of El Capitan in 18 hours and 23 minutes, I can make THIS work!”
Watch the clip below: