Early Comments on the Upcoming Election

Victor Levinson Comments

With all that is going on in the world, there is an additional wildcard, namely the upcoming US presidential election. As our regular readers know, we at PPA maintain that who is President is only one of several factors affecting stock and bond prices. Even if we know who is going to be President, no one can predict what will happen during that presidency.  Trump’s presidency is a perfect example (see July Comments). Even now, with Biden leading in the polls, stock prices have been rising for most of the past few months.

During August, the coronavirus continued to spread health and economic misery; protests about systemic racial injustice intensified; and the Democratic and Republican parties held their respective conventions. None of this news appeared to slow the advance of US stock prices, although we have to acknowledge that the advances are primarily taking place with a small number of high tech stocks that appear to have benefited from the otherwise negative impacts of the virus.

We will continue to comment on the election as the time gets closer, as it is likely to become a popular topic in the media. But we repeat that in our view, there is nothing inherently predictive about the connection between market prices and election results, certainly not as time passes and other intervening events become more important.

Our advice remains the same: maintain asset allocations developed for your circumstances for the long term, and rebalance from time to time based on significant changes in market prices, which means selling the better performing asset class and buying the weaker performer in a given time frame.