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Weekly update: Election week

Weekly update: Election week

| November 06, 2020
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Welcome to the other side of election day! We still don’t have the results yet, due to five states that have not finished counting absentee/military/overseas ballots. Georgia, Pennsylvania, North Carolina, Nevada and Arizona should be reporting results by this weekend. The Oval Office and the Senate are undecided, with record numbers of voters participating in this election. There will likely be at least one run-off election in early January for a Senate seat. The markets responded as expected, with volatility leading into the election and relief rally following election day. Most interesting is that it didn’t matter that a winner wasn’t announced, the market still rallied! See how much in the graphics below.

Market news in election week

Of course, we remind you that the markets do just fine, regardless of the political party in power. In the past, we have shared the graphs that show little difference whether the Democrats or Republicans are in charge, so this week we will share that the S&P 500 historically has done quite well under a divided Congress as well, up more than 17% on average (blue bars in the graph). GDP tends to grow slightly more under a unified Congress (green bars). Fortune’s Anne Sraders digs into the numbers.

Stimulus unknown: There is a downside to divided rule, from our perspective: People probably won’t get that generous stimulus package they were pining for just a few weeks ago, and that could mean more pain for financials, airlines and value stocks. If the Democrats do win, they have announced their plans for the long-awaited infrastructure stimulus, which will help construction companies and other value stocks. In the short term, the market likes larger stimulus because it creates more jobs and consumer spending. If the Republicans retain control of the Senate, they likely will not fund the larger stimulus package.

Otherwise, it’s a great week! The unemployment rate fell to 6.9% as the U.S. added 638,000 new jobs this week. Over the past four days, the Nasdaq has rocketed 7.8% higher, putting growth stocks on pace for its best week since the go-go-go days of April. The S&P 500 and Dow Jones indices are also having a nice bull run, as the chart below shows. As of yesterday’s close, the Dow is roughly 0.5% away from hitting break-even for 2020.

News from the pandemic

Amid a spate of new cases on both sides of the Atlantic, the United States saw a new single-day record of over 100,000 confirmed Covid-19 cases on Wednesday.... which was quickly overtaken with a new record the very next day. If the upward trend continues, we’ll surpass 10 million total confirmed cases by Monday. (NBC)

What should you do about this? These numbers demonstrate the pandemic is far from over, and there’s reason to believe winter—when it’s harder to socialize in the relative safety of the outdoors—will be tough for a lot of us.

  • Get a flu shot
  • Wash or sanitize hands frequently
  • Wear a mask and continue staying apart from people from outside your household

We like this slightly nerdy chart showing hospitalizations for “Covid-like illnesses” (CLI, orange line) and “influenza-like illnesses” (ILI, green and blue lines), as it gives a fuller picture of what’s going on in the nation’s hospitals. Visits for Covid-like illnesses, whether confirmed through testing or not, are currently on the rise. (CDC)

Tax news: The standard deduction has increased in 2021, which is good news for almost everyone. MFJ standard deduction increased from $24,800 to $25,100 and Single/MFS increased from $12,400 to $12,550. Our new 2021 Tax Cards should be available in about a month and will be mailed to you as soon as they are available.

If Joe Biden wins the presidential election: We’ve had a lot of questions about Biden’s proposed tax plan, and this article captures the plan best: Joe's Tax Plan. We do not believe anything will change next year, regardless of whomever wins.  All efforts will be on Covid-19 and stimulus plans. 

If Donald Trump wins, then taxes are scheduled to go up in 2026, and that is built into the current tax law.  Given the deficit, it is doubtful that any Congress will change that law.

We’ll continue to do our best to ‘Make Every Dollar Count’ for every one of our clients!  Meanwhile, have a wonderful weekend, and stay safe and healthy, wherever you are.

Your Clear Perspectives Team

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