Warning: Don’t Let The Election Cloud Your Judgement
We’re in the final countdown to the election. And I’m betting many of you are wondering, perhaps even growing anxious, about how it will affect your portfolio.
I want to point back to something I wrote four years ago, during the last election. Here’s what I told my subscribers…
Welcome to third-quarter earnings season and the fourth quarter of 2016. It’s hard to believe that we’re in the final stretch of the year. These final innings, however, should be rather interesting.
Not only do we have an earnings season that the market will be digesting over the next few weeks, but the Federal Reserve is keeping us in limbo on what they might do with interest rates. And to top it off, we have a presidential election featuring two of the least liked candidates in more than 30 years, according to a poll by ABC News and the Washington Post.
So I hope you’re buckled in and ready for what could be a wild ride.
While things are slightly different this time around (thanks coronavirus), much hasn’t really changed with my above statement.
The presidential candidates — President Trump and former Vice President Joe Biden — are once again largely disliked across most of America, according to a New York Times poll. And the (once again) contentious Presidential election will have many folks on the edge of their seat until the final votes are tallied.
I do think we should expect some volatility as we head into the final weeks of the Presidential election. And I know there are a lot of folks on both sides of the aisle who are worried about what might happen should the person they didn’t vote for getting into office. I get it.
While I believe this (and every) election is vital, keep in mind that many of the concerns out there (strictly speaking in regards to the stock market) are largely overblown.
A Trip Down Memory Lane
When President Trump shocked the world and won the 2016 election, U.S. stock futures plunged. S&P 500 futures tumbled 5%, hitting a limit designed to halt further drops, and the Dow futures were down as much as 900 points.
If there’s anything the markets don’t like, it is uncertainty.
Headed into the 2016 election, it was a near certainty (according to every poll, political talking head, and media outlet across America) that Hillary Clinton would become the 45th president of the United States.
When that didn’t happen, the markets initially tumbled. But by the time the markets opened the next day in the United States, the major indexes had already recovered most of those losses.
This time around, we could see market volatility heighten as the market digests the winner and what it might look like for the economy and publicly-traded corporations.
The Key Takeaway
I’m confident that regardless of who wins, one thing is certain… Technology companies like Intel (Nasdaq: INTC) will continue to innovate and produce smaller, faster chips. Healthcare companies will continue to develop new products and solutions for patients. Pharmaceutical companies will continue to churn out medicine, develop new drugs, and pioneer new vaccines.
Companies like Hershey (NYSE: HSY) will continue to make — and sell — chocolate, Starbucks (Nasdaq: SBUX) will continue serving coffees, Hasbro (NYSE: HAS) will continue selling toys, and Lennar (NYSE: LEN) will continue building homes.
In other words, it will be business as usual for many companies in the market.
Could some policies and/or tax changes curb profits of some industries and companies? Sure, but companies have persevered despite regulations and heavier tax bills thrown their way.
There are many companies out there that will be just fine regardless of who wins. The bottom line is that we shouldn’t let the election — or the election outcome — be the guiding force for our investment strategy. I’m a strong proponent of leaving emotions out of your investment decisions. That’s already an extremely difficult task.
If you want to let your political emotions spill over, save it for the dinner table at Thanksgiving.
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