Running up to the election in 2016, I believe the market was down 12 days in a row or something along those lines. We’ve seen a substantial selloff once again running into this one as tensions are high and stimulus is not happening prior to the election. Facebook, Amazon, Apple, and Google were down by about 5% yesterday for instance, but almost everything has been hit hard of late.  We saw one of our biggest runs ever after the 2016 election.  Futures started the night off down huge and then reversed, and we saw a massive rally from there.  I think it is possible we’ll see something similar again this year, as people start looking towards 2021.

On the negative side, much of Europe is imposing new restrictions. They are more mild than previous restrictions, mostly impacting restaurants, bars, gyms, and hotels, but they certainly don’t help the economies there. They are offsetting some of the damage with stimulus, but the money printing doesn’t last forever, and people are getting increasingly fed up with restrictions as we see with riots in many nations.  The U.S. posted one of the best quarters of GDP growth in history today, but make no mistake the economy is still down materially for the year.

The polls show a commanding lead for Joe Biden to become the next President of the United States. I think the market is mostly pricing that in, in terms of the stocks that have done well and those that have done poorly.  Issues such as higher tax rates and increasing regulations are negatives for stocks, but are perhaps offset by hopes of higher stimulus measures.

In 2016, most polls did not perform very well, but supposedly have been adjusted. (I’m not too sure on how much I believe that) The swing states appear to be a lot closer than national polls and combined early voting trends actually look a bit more favorable to President Trump. The election can go either way and I think both sides feel fairly confident, which is quite the setup for disappointment one way or the other.

There are concerns of a contested election, but I think the election is unlikely to be that close. Non-party affiliated voters have a great chance of swinging the election either way, and nobody knows for sure which way they will vote.  For instance, if Michigan is a blowout for Biden, it is tough to see Trump winning Wisconsin and Pennsylvania. However, if Trump wins Ohio and Florida by a bigger margin than 2016, historically that has meant that Pennsylvania and Michigan have veered more right as well, implying a large victory for the incumbent.  Nobody knows for sure but we are prepared for either outcome.  Volatility is spiking due to uncertainty, but I’d urge you not to stress too much. Stimulus is coming and the economy is going to have a strong recovery. Valuations on our stocks are exceptionally low, lower relative to intrinsic value than any point since 2009, which was the biggest rally we have seen in my career.

Hopefully we have a smooth election and emerge less divided by some miracle!