With Election Day a mere five days away, we at LPL Research thought we would add one last election forecaster to the mix of what we’ve presented over the last several months—as much because of what it might tell us about the American electorate as what it might tell us about the election.
As the US economy transitions from lockdowns—where 90% of Americans were under a stay-at-home order—to continued reopening, we assess the state of American consumer confidence to spend despite the persistent COVID-19 outbreak.
Reopening the economy should, in theory, clear the runway for takeoff, but consumers need the confidence to spend. “While the stock markets have recovered, and employment is getting better, consumer confidence remains very low,” explained LPL Chief Investment Officer Burt White. “The economy’s biggest anchor isn’t that we haven’t reopened—it’s that consumers lack the confidence to spend.”
Historically it has been unwise to attempt to “play” the stock market ahead of an election in an attempt to position based on perceived implications of a president’s policies, but the municipal bond market may be more susceptible to the results of this election. As stimulus talks in Washington appear stalled but not officially over, we outline the potential for investment opportunity in the municipal bond market going forward.
With the election only eight days away and earnings season in full swing, stocks have bucked the usual October weakness during election years so far in 2020 (Monday’s losses notwithstanding). The good news is this could continue, as one of the best days of the year is right around the corner.
As concern over the upcoming election continues to build, one of the questions we’re getting is whether investors should sell ahead of the election for fear the party they don’t want to win takes over the White House.
As tempting as this might be, we would continue to focus on the economy instead. “Whoever wins the election in November is going to take over an improving economy and one that likely won’t see a recession in 2021—and that matters more to stocks,” explained LPL Financial Chief Market Strategist Ryan Detrick. “Not to mention that many gains were missed out under President Barack Obama and again under President Donald Trump, due to disagreement over their policies.”
First and foremost, we wish President Donald Trump and First Lady Melania Trump a swift and full recovery. This October surprise raises the already high level of political uncertainty markets are dealing with as Election Day approaches. As market participants digest this news and consider the possibility that the President may not be able to fulfill his duties, markets may become more volatile. However, we believe Trump’s odds of beating the virus, as the United Kingdom’s Prime Minister Boris Johnson and Brazil’s President Jair Bolsonaro did, are quite good. As the President and first lady of the United States, Donald and Melania Trump will be monitored closely and have ready access to the best health care in the world.