How To Invest After The Election

In case you think the US election is the only thing people are thinking about, you can also think about investing before/during/after the results! I never expected to write about investing during the results, but here we are.

Many people have been nervous about investing before the election, in case there was a massive crash immediately after. Others have been piling in, certain that a huge boom is on its way as soon as the winner is announced.

Don’t sweat the short-term stuff

As with anything related to news and investing, your best course of action is to take the 30-year view. Things could get pretty wild between now and 20 January:
– Armed militia take to the streets to protest
– Joe Biden gets coronavirus
– Even more people get coronavirus than are already getting it
– Recounts drag on into December
– Trump is dragged screaming from the White House

I would say coronavirus tallies and their impact on the economy are more likely to have an impact on the stock market right now. And of course, taking our 30-year view, nothing is going to have such an impact as to stop you investing on Monday if you have money sitting there ready to go.

What do stock markets like?

People always claim ‘markets like certainty’ or ‘markets climb a wall of worry’, among many other things. As these two statements are contradictory, it’s pretty clear that nobody knows what markets like. It tends to all be backwards-looking analysis based on what’s happened that day.

It’s pretty clear that markets don’t like once-a-century pandemics (see March 2020) but have got used to one now, as have we all. The US’s S&P 500 index has been steadily rising since March, though scary images of overflowing hospitals and a tough lockdown hitting the economy hard could drag it down. A panic crash similar to March seems unlikely though, as we all know what’s going on by now.

Some good vaccine news might kick the markets upwards, though stories of mutations, side-effects and disappearing immunity makes me feel a ‘magic bullet’ that takes out the spiky sucker once and for all is unlikely.

Red or blue markets?

Do markets prefer Trump or Biden? It seems the right answer is ‘meh’. Traditionally, Republican tax cuts and ‘business-friendly’ policies have been seen to help markets while fear of Democrats raising taxes, breaking up big businesses and piling on red tape hold the stock market back. Comparing Obama’s and Trump’s last few years in office would suggest otherwise, but there are a few confounding factors like a big fat pandemic.

Trump is unpredictable though and not exactly a favourite of Wall Street’s newly popular ESG (Environmental Social Governance) funds. Biden is not exactly a Bernie-style radical leftie and he might bring the sort of behavioural certainty that markets allegedly like.

What apparently makes markets salivate even more is the prospect of political gridlock, with a Democrat president and Republican-controlled Senate (and possibly House). If nothing can change, then businesses can carry on making money more or less as now – as everyone is now used to the 2020 way of doing things, efficiency and stabilty should boost profits. For every Boeing there will be a Zoom.