The Election

Last week, we were privileged to host a conference call to discuss the impact the election and political climate might have on the economy and markets over the coming months. Please see below for the key takeaways from the call:

Stimulus

There is very little chance of further stimulus prior to the election. Despite recent favorable talks, the parties are too far apart to come to a meaningful compromise.
Both parties are very positive surrounding further checks to citizens. Trump does have the ability to send checks by executive order, and this option may be a strong possibility should Trump continue to struggle in the polls.

Debates

Future debates are likely to be more civilized – the format will be improved to allow each candidate to speak clearly.
The VP debate was crucial. With questionable health of both candidates, eyes will be on the Vice Presidential picks. The debate was much more focused on the issues and politics rather than the emotions.
Polling

Pollsters have referred to the “shy voter” – voters who in responding to polls may be less inclined that they’re leaning towards Trump out of fear of social backlash. The Trump Campaign believes that 5-6% of voters may feel this way – skewing polls in the favor of Biden. Even if it represents just 2-3% of voters, the battleground states suddenly become incredibly tight.
There are three primary sources for accurate polls – RealClearPolitics, the betting odds in Vegas, and the Bureau of Labor Statistics at the Department of Labor. Unemployment in key battleground states will be a crucial factor – and it tends to be rising in battleground states.

Congress

Based on current polling, it is unlikely that the House of Representatives will flip to Republican majority.
At this point, it is a coin-flip that Republicans will hold control of the Senate. Many Republican senators saw bumps in polling from the announcement of the new Supreme Court justice.

Election Day

There are concerns that there will be a very prolonged period before winners are known. With a large number of votes being mail-in, it could be several weeks before the votes are counted and an official winner is declared. Brace for volatility on this front.
Politico reports 73% of voters are concerned we will see violence in the streets around election results. However, it remains to be seen whether political unrest will affect the markets. The markets roared in the 60s and 70s during times of significant social unrest.

Policies

While Joe Biden may hold back on a tax bill next year to allow the economy to recover further, the HoR is strongly considering introducing a tax bill to help state and local governments remain solvent. Many deductions at the state and local level may be under risk. Often, when tax bills are introduced, they act as “Christmas Trees,” with each congressperson attaching their personal favorite tax policy to the bill like an ornament.
Climate Change will be a massive policy issue. Joe Biden is proposing to be emission neutral by 2030, and many industries will be significantly affected. He plans to return the to the Paris Climate Accord on day 1 in office.
Relations with China are important, but policy will remain the same regardless of winning party. Both parties recognize China is a significant threat to American freedoms, and both parties are willing to play hardball in negotiations with China. There are many concerning items from China, including dominance over 5G technology and human rights.
India may be a key strategic partner in the future – with close proximity to China and the potential for a part-Indian VP in Kamala Harris, India may develop as a new ally for the US.
Interest rates are expected to remain low regardless of president – Jay Powell of the Federal Reserve is likely to remain in place regardless of election winner and he is committed to low rates for the foreseeable future.

We are appreciative of those of you who joined us on the call and hope these notes will help provide clarity on the election season. Overall, the election may be unlike any we’ve seen – but markets will appreciate certainty and adjust to economic policies as they always do.

Disclosure:

The opinions voiced in this report are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult Gallacher prior to investing. All performance referenced is historical and is no guarantee of future results. Economic forecasts set forth may not develop as predicted. Research material prepared by Gallacher and DWS Investments.

Gallacher does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Gallacher cannot guarantee that the information herein is accurate, complete, or timely. Gallacher makes no warranties with regards to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

All information is believed to be from reliable sources; however, Gallacher makes no representation as to its completeness or accuracy.