The attached link to the CNN Business article entitled “Wall Street Could Call the 2020 Election Before the Media Does” discusses investors’ anticipated reaction to a Biden or a Trump election win.  It also speaks to a deep concern about the possibility of a contested election, and a way that we might be able to predict the final outcome well before the media projects a winner.

Link to CNN Business article: https://www.cnn.com/2020/10/21/investing/wall-street-election-trump-biden/index.html

What the market does not want to see is a contested election. If that happens you will see the market go down at least until the winner is affirmed. However, in my view that’s going to be a temporary event lasting only a few days, a few weeks, or maybe a couple of months at most. Don’t panic if this happens.  Sooner or later the situation will be resolved and the markets will return to normal.

The greater danger in my humble opinion is the possibility of a second surge of the virus during the regular flu season. You can see signs of that surge beginning to happen already with virus cases increasing across the nation with school openings and cooler weather starting to keep more people inside. The problem is that every autumn and winter the regular seasonal flu puts people in the hospital, and even into intensive care wards, and of course so does COVID-19. The potential problem is a healthcare overload resulting from an increase of infections from both viruses. If hospital capacities are stretched to their limits, states will have no choice but to start shutting down again which will naturally affect the economy and put people out of work. We are especially vulnerable in this country because we were never able to get the first surge under control.

So far market investors have taken the long view, counting on the economy to improve greatly after the virus is under control with vaccines, etc.  The question is whether investors will continue with this positive thinking if there are at least partial shutdowns in a number of states. Also keep in mind that it is likely that all of this will be occurring at about the same time that we will get news about how safe and effective the vaccines, which are in testing, will be in combating the COVID-19 virus. 

What is unknowable is how all of this will ultimately play out together and how it will ultimately affect investor sentiment. The only thing that I can predict is how I will personally react. My thoughts are that if the market experiences a downturn I won’t be selling my existing stock. Instead, I will be using my reserve investment cash to buy more stock to better balance my equities to interest bearing investment ratio.

How you should react to all of this depends on your personal situation and your current investment positions.  However, if you currently have investments in the market and/or plan to make such investments in the near future, it is best to plan now how to react to all eventualities.  But remember, whatever you do, don’t make the worst investment mistake possible by panicking and selling your stock when the market is down.

Cajun (Rick Guilbeau)    10/21/2020