A majority of markets – equity, treasury, and commodity – started selling off on October 23rd. This was to be expected even without the increased COVID-19 cases in Europe and the U.S., due to the election and the many unknowns contained in possible outcomes being discussed throughout the media (including riots). The election is not predictable with certainty. My preference is to suggest what is “supposed to happen” and then base investment decisions on the future rather than the particular event.
First, I want to point out that COVID-19 was not the cause of the recent economic decline. The decisions to shut down the economies of many states and cities by those Governors and Mayors were the actual cause; a very poor choice of combatting the virus problem. Many Asian nations never closed down their respective economies and had amazing results. Taiwan is one of the best examples; as of this writing - with a population of over 23 million – the nation has 555 cases reported and only seven deaths. Compare that to New York, which has 20% fewer people, but has 510,171 cases and 33,143 reported deaths. There were many other Asian countries with these kinds of startling outcomes. Seven U.S. states did not shut down the economy, yet had good results. As an example, look at South Dakota, which had 44,559 cases and 415 deaths with a population of over 900,000, giving a fatality rate of only 0.04% of the population.
Second, there is the election. What is supposed to happen?
With the riots in major cities – most recently Philadelphia – added to the economic crisis caused by the lockdowns (more heavily imposed in areas controlled by Democrats), I would think the chaos and anarchy would favor the GOP who run on a platform that highlights the slogan of “law and order.” I find the recent New York Post articles detailing alleged criminal activity by Joe Biden equally troubling. In addition, the outright promotion of socialism by large segments of the Democrat Party “should” go heavily in favor of Trump. His ability to draw tens of thousands of voters to his rallies shows he still has a large base of support. In my opinion, if Trump doesn’t win, it will show that the American people - no matter what happens to them - don’t understand the consequences of the policies Biden supports, and the U.S. will continue to decline into a quasi-Venezuela. Socialism is not an alternative to capitalism; it is only designed to destroy it. As Mark Levin so aptly stated: “The diabolical genus of Socialism is that it provides an emotional and intellectual roadmap for autocracy to persuade millions of people to support their own enslavement to Government.”
The markets will respond to the full outcomes in the House, Senate, and Presidential elections (and to a lesser extent, the state and local elections), using the overall margins of victory as a guide.
The statements in this communication are the opinions of its author, Victor Sperandeo, and are not to be relied upon by anyone as the basis for an investment decision. Any investments made by a party in reliance thereon are made at such party’s sole risk. No guarantee of any kind is implied or possible where opinions as to past or future market conditions/events are provided. Past performance is not necessarily indicative of future results.