Post US Election Update

Last month, we wrote an article for Forbes magazine about how this year’s US presidential elections could impact the stock market.

Here is how our prognosis stacked up to what has come to pass over past couple of days:

The impact of mail-in votes

“The first major issue is that Covid-19 restrictions will create a very different in-person voting environment than in previous elections. It is also anticipated that there will be a record number of mail-in votes, which take considerably longer to tabulate. This means that there could still be many votes to count in the days following November 3rd.  

What’s more, it currently looks like far more Biden supporters intend to mail in their votes than Trump supporters. This could theoretically create a scenario wherein Trump could take the lead in many contested states only to ultimately lose when the mail in votes are all counted.”


This is exactly what happened. Trump is contesting results that do not favour him, but his challenges have not amounted to much. Tweeting about things that upset you versus having sound legal grounds to contest electoral results are completely different matters. Regardless of the outcome in Pennsylvania, if Biden’s lead in Nevada is sustained, he will be the next president-elect of the United States of America.

Market participants overplaying potential chaos

Under normal circumstances, this type of electoral uncertainly would tend to have a negative effect on markets. But this has been a year far from a normal circumstance. During 2020, the S&P 500 has already fallen 34% and then subsequently risen 60%.The US economy has been shut down. Almost 200,000 Americans have died. Will one week, or even several weeks of waiting for election results cause mass panic? Or will certainty and closure one way or another be followed by some portion of the massive amounts of money sitting in money market funds flowing into stocks?”


Markets have rallied strongly. Similar to 2016, they have adapted to whatever narrative suits them best. When Trump was in the lead, markets rallied. As Biden took over, they rallied even more. This speaks to the fact that chaos was the wild card that was most feared, not the actual election result, which we also addressed in our core thesis: markets adapt to elections and historically move upwards.

What happens next?

“If Trump wins, there will most likely be more tax cuts. In the short term this would be supportive of risk assets. If Biden wins, he is expected to eventually repeal some of Trump’s corporate tax cuts, but intends to make massive investments in green infrastructure and education. Again, government spending is supportive of risk assets in the short term.”


Although it looks like Biden has indeed won, there was not a resounding ‘Blue Wave’ of sweeping democratic victories in the House, and – especially – the Senate.

This means that the Democrats will not be able to force through their initiatives the way that Trump and the Republican controlled Senate has done over the past four years. Instead, it opens the door to cooperation and less extreme policy initiatives. Biden is a centrist and his cabinet could actually have some former republicans.

We have positioned our portfolios to benefit from investments in green energy and infrastructure. Although a democrat controlled Senate would have made these a priority, we think that Republicans fully understand that these types of investments are necessary and potentially lucrative for private sector investors, and that Republicans will ultimately support this type of fiscal spending. Trump also had infrastructure spending high up in list of second term priorities. We also expect that a new Covid-19 stimulus bill will be passed as matters trend towards electoral certainty.

What’s next?

The scene is now set for the 2024 presidential elections. Biden will not be a two-term president. Trump’s populism has been narrowly defeated, and this opens the doors for the Republicans to actually work on policy rather than populism.

Of course, everything could change, and if it does, we will act and provide further analysis.

Here is how the S&P 500 has performed over the past 30 trading sessions:

Notice how the S&P 500 is now +6.39% higher than its lows last week? What’s more, as I write this post S&P500 futures are +1.76% today. Put simply, if you panicked last week, your opportunity cost is now around 8%. Do you continue to hold out and hope for chaos so that your pre-election thesis will be confirmed? Do you continue to wait as the market keeps moving against you? Or do you accept the situation and buy back stocks at what turned out to be an 8% “panic premium”?

Investing in stocks is not easy. I would be the first to admit to that. And this is why removing yourself from current market fluctuations and having a broader perspective is so important.

We did not have full certainty of what would happen in this election, and submitted our article to Forbes in the third week of September.

But we analyzed the circumstance based on data and experience and never lost sight of this little chart here:

It continues to serve our clients well.