Markets Love a Flight Plan

Today, we are roughly 2 weeks out from the 2020 election.

Like most of you, I am sick of the ads and constant coverage and yearn for not having to view political ads every 10 minutes…

Over the past couple of weeks, folks have wondered what my thoughts were on the election and how it will ultimately impact the markets and their savings.

So today, I wanted to address these concerns and provide some insight into what is going on, what we need to do as a country to continue repairing the economy, and ultimately how it impacts you.

Essentially a market flight plan.

This post is not intended to sway your political opinion one way or the other; it is meant to be an objectionable piece that provides you a realistic analysis, so please do not misconstrue anything in this post.

Let me start by making two statements I feel rather confident about:

  1. I have no idea who will win the election
  1. There is a massive disconnect occurring between Main Street & Wall Street

The second though is what is keeping me up at night.  

While the markets roar on, lines at the food banks are getting longer and longer, and the wealth gap is being exacerbated. 

Weeks of not receiving unemployment checks and a lack of support financially for specific businesses all are painting a very concerning scenario.

In fact, this recent chart from J.P. Morgan Chase confirms my suspicions:

People are running out of money.

So what needs to be done?

This really is a two part question.

First, at the onset of the pandemic, I alluded to Mohamad El-Erian’s ‘Four Bazooka’s’ theory, and the fact the government needed to do something bold and ambitious. Subsequently, Congress responded along with the Federal Reserve in helping to pull the economy back from the edge and start down a path, albeit quicker than most anticipated, towards recovering.  But that ‘topping off of the tank’ can only get us so far, and now the car is driving uphill on fumes.  

No one knows for sure when it will run out of gas, but the needle is on E, and unlike Kramer in Seinfeld, I prefer not to push our luck.

So we need something bold….

At the beginning of the pandemic Rep. Maxine Waters had drafted a piece of legislation that read like a wish list, but also checked the box of being something substantive that would help push the economy over the hill.

That bill never became law, but now with the chances of a Democratic sweep, another bold bill is being queued up.

Economically, we need something along these lines.  And while yes, there eventually will be a time when this all needs to be paid for, now is not the time to be worried about it.  Federal Reserve Chairman Jerome Powell said as much during a speech on October 6, 2020 to the National Association for Business Economics:

“Yet Powell said Tuesday that the risks of Congress pouring too much stimulus into the economy are far lower than the risk of not doing enough. Although government spending is adding to an already sky-high federal budget, lawmakers should act, Powell argued.

The US federal budget is on an unsustainable path, has been for some time,” Powell said. But “this is not the time to give priority to those concerns.”

Simply put, we need to keep refilling the tank until a vaccine is found, which I truly believe is around the corner.

Which brings me to my second point – a vaccine.

Every day, the markets are moving on a hope and a prayer that scientists have found the one, sometimes to be disappointed.

Ahhh Americans, we are known for a lot of things, patience not being one of them…

To be clear on the vaccines: there are two different types of vaccines in development –

one is a multi shot vaccine, the other is a single shot.  The single shot vaccine more than likely will not be available until mid next year.

But development and deployment are two different things.

State governments just submitted deployment plans for the vaccine to the CDC on October 16.

This is all well and good, but ultimately how does it impact me?

Simply put, follow the money.  

Spending less  impacts us all and acts as a domino effect on the economy, which ultimately ends with your investments.

So whether it be buying groceries, an airplane ticket, or working in an office, that one transaction multiplied by millions has a broad and deep reach into our economy.

Sounds scary, should I get out of the market?

In fact, this would be the worst decision you could make.  I do anticipate some bumpiness over the next couple of weeks, as markets loathe uncertainty, however presidents do not make markets. Monetary & fiscal policy do.

In fact, the best course of action is to hold steady.

Credit: Steve Deppe CMT

At this point the belief is not if there will be a stimulus, but just how much.

After the election I hope we have more certainty, and at that point I will discuss which areas of the market I think may benefit from these actions.

In the End…

I can see some storm clouds on the horizon, but looking through them I see glimmers of sunshine and a bright future ahead.  Just like February/March felt like it would never end, let’s remember that we’ve made it to October.

In closing, I will leave you with one of my favorite songs that symbolizes the essence of our country:

Disclosure: The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual. 

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