Ask the Rational Investor: Investing During the 2020 Election
This year has not been easy on long-term investors—with the Coronavirus recession and whipsawing stock market prices—most investors (and portfolio managers) are exhausted! The Presidential election provides yet another highly-uncertain outcome before the end of the year, with important questions regarding further stimulus still to be answered.
If Vice President Biden wins the White House, a large fiscal stimulus package will likely be passed, focusing on areas of the economy with ‘high multipliers’—investment areas that in turn lead to further growth, such as infrastructure and healthcare. With a cost of about $2.4 trillion, it would account for about 11.5% of annual gross domestic product, and be funded by higher personal and corporate taxes.
If the White House remains under the Trump Administration, a slightly smaller bill similar to the Treasury’s Proposal of about $1.8 trillion will likely be pushed, accounting for about 8.6% of the economy. Notably, both the Democrat and Trump administration proposals are significantly larger than the $500 billion Senate Republican Bill.
Proposals for stimulus payments and tax credits from both Democrats and the Trump administration are quite similar, at about $340-$360 billion. While policies change by the minute, the common thread is that additional stimulus is likely.
Thinking ahead to 2021, the economy could look quite improved. Consumer and business confidence should return with the emergence of a vaccine and some form of conclusion to the COVID-19 pandemic. Fiscal stimulus will provide a supply-side boost to the economy, and the continued Federal Reserve policy of near-zero interest rates until inflation reaches 2% will maintain the relative attractiveness of equities, compared to other asset classes.
In highly emotional situations, careful review and maintenance of asset allocation is critical. Due to the strength of the American and global economies, stock prices generally rise over long periods. When you are investing for the long term, it is most prudent to stick to the allocation strategy that matches your overall goals – no matter how scary things may seem.
Sources: Goldman Sachs
Beese Fulmer Private Wealth Management was founded in 1980 and is one of Stark County’s oldest and largest investment management firms. The company serves high-net-worth individuals, families, and non-profits, and has been ranked as one of the largest money managers in Northeast Ohio.