Election, Economic and Pandemic News Overlap

As the country enters the final countdown to the U.S. Presidential Election, interest in the outcome seems to have hit an all-time high. The intense election atmosphere, combined with the ongoing coronavirus pandemic, a controversial Supreme Court confirmation process, high unemployment, and a worrisome economic outlook, is feeding investor anxiety and elevating the prospect for market volatility. Add the lack of new economic stimulus before the election to the list of growing concerns for both main street and wall street. We are experiencing what happens when election, economic and pandemic news overlap.

Current Sandbox Clients: Over the past few months, we have reduced investment risk for many clients with the expectation of heightened volatility and larger price swings across the broader stock market. The result is a larger allocation to money markets, bonds and fixed-income which unfortunately pay very low levels of interest but are areas that should help preserve value during times of increased uncertainty. As we receive more clarity, we will communicate with you on how we will position accounts to coincide with your financial plan.

New Sandbox Clients: We have stayed defensive holding high amounts of cash until after the election. As we begin to understand the economic playing field, we will begin to invest towards a strategic allocation that coincides with your financial planning goals.

Long-Term Investors & Clients: These market environments are often favorable entry points to begin dollar cost averaging into investment you desire to hold for growth. With a long term horizon, these pullbacks provide you with the opportunity to buy on sale. For many, we have and will continue to take advantage of these opportunities.

Regardless of Outcome, Do NOT Overreact!

To reiterate, stock markets do not like uncertainty and you tend to see larger price swings with downside pressure until the dust settles. As the path forward or political landscape becomes more visible, you will begin to see a rotation of money into investments that will be beneficiaries of the future environment and away from those industries that will be negatively impacted. Keep in mind that there is an abundance of cash on the sidelines globally with very low interest rates so markets can rebound back quickly. Timing the market is extremely difficult and it often makes more sense to make small tweaks or do nothing as time tends to cure short-term emotions.

For many investors, a key question leading up to the election is whether they should make changes to their portfolios or their financial plans in anticipation of a particular outcome. Our view is that investors should not overreact to possible outcomes. There are far too many unknowns. And even after the election, there are no certainties about what the incoming Congress or administration will do, what the priorities will be, or how the timing of policy initiatives will play out. We encourage all clients to remain confident in their long-term plan which can help weather a variety of potential outcomes. Each client is unique and we are here to discuss the most appropriate path forward.

The Sandbox team continues to work from home with occasional visits into the office. We have full capabilities for conference calls and virtual zoom meetings plus our office phone numbers ring directly to our mobile phones. If you would like to connect after the election to discuss your investments and financial plan, please send us a note and we can coordinate a good time.

Perspective: Some Great Charts and Visuals Below

Investing in the stock market is inherently volatile. Large pullbacks can occur at any time, as markets have experienced 11 pullbacks of 5% of greater in 2020. However, stock markets have still proven one of he better assets classes for growth over time.

On average, the stock market experiences an annual drop of -13.5% but in most years it still ends in positive territory with the S&P 500 averaging 9% gains annually.

While bear markets (negative) are unavoidable, bull markets (positive) are much longer with larger returns. Since 1956, the average bear market has lasted one year two months with a decline of 36%. In contrast, the average bull market lasts 5 years 9 months and returns 192%.

The coronavirus is still spreading worldwide and controlling the spread will determine how long the economic disruption may last.

Election, Economic and Pandemic News Overlap