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Post-Election Investment Committee Notes

Post-Election Investment Committee Notes

November 13, 2020

Should you have any questions regarding these notes, please do not hesitate to contact Kevin at (404) 788-3539.

Executive Summary

  • As the results of the election move to the rearview mirror, markets have initially responded positively to the idea of a divided government.

  • From a historical basis, markets have done well under this construct. Markets tend to hate uncertainty, and this structure tends to produce an environment in which no one party can move things too far in either direction.

  • Economic reports continue to surprise on the upside. Friday’s unemployment report saw the participation rate rise, the jobless rate dropped below 7% and more jobs created than were expected. Both the service and manufacturing sides of the economy continue to rebound, expanding at a faster than expected pace, according to last week’s PMI reports.

  • Today’s announcement by pharmaceutical company Pfizer, that their vaccine could be as much as 90% affective against the COVID-19 coronavirus, has sent markets significantly higher. This is based on the potential of re-opening the economy sooner than expected.

The investment committee met on the afternoon of November 9th.  We had a lot to review given all that has happened in the last 30 days between a rising number of COVID cases and the outcomes of the Presidential and Congressional elections.

Post-Election Market

The good news is that the model portfolios of the investment committee continue to outperform their risk-adjusted benchmarks over the most recent one, three and five-year periods.  The adjustments that have been made over the last year seem to have us positioned well. We will now be looking forward to the continued reopening of the economy, progress on vaccines and therapeutics, and on the ultimate outcomes of the election.

As we look forward to 2020 finally being behind us, it appears that the election has moved the country more towards a centrist outlook based on the decisions of the electorate.  This is in stark contrast to what polling was indicating.  It appears that the House of Representatives lost a number of Democratic seats, weakening the power of the Speaker of the House.  A similar thing appears to have happened in the Senate, where it looks like the Republicans will keep a slim majority. This should act as a check on the more progressive portions of the Democratic party in the House and potentially our new Executive branch. 

Initially the markets had responded very positively to the idea of a divided government. As you can see below, markets have historically done well under this construct.  In general, markets tend to hate uncertainty, and a structure of divided government tends to produce a more stable environment, in which no one party can move things too far in either direction.  This seems to be what the American people ultimately wanted.

Impact Of A Possible Vaccine

From an economic standpoint, reports continue to surprise to the upside.  Last Friday's unemployment report showed nearly 100,000 more jobs being created than were expected and the unemployment rate dropping below 7%.  This was far better than anticipated, especially considering that the employment participation rate moved back up.

In addition to this, both the service and manufacturing PMI reports showed the economy growing at a faster pace than was expected.  In particular, the manufacturing side of the economy increased at the fastest pace in more than two years.  The employment portion of the index was very constructive and the new orders component moved up the most since 2004. As these are leading economic indicators, this bodes well for continued progress. This is especially important given the increasing COVID cases, which when combined with the coming flu season, could lead to far more lock-downs or restrictions.

To that end, today's announcement by a leading pharmaceutical company that their vaccine could be as much as 90% affective against the COVID-19 coronavirus, has sent markets significantly higher.  It increases optimism that large parts of the economy could re-open and life could move back towards something that resembles normal by sometime next year.  This would all be constructive towards jobs, corporate earnings and profits.  We will continue to monitor this going forward.

Final Takeaway

The markets have moved up very quickly over the last week. We want to remind you, our trusted friends and clients, that markets do not move in straight lines, and that we would expect more volatility as we head towards year-end.  We will use upticks in the market to continue to create cash for liquidity needs over the next 6-12 months or so. If you have questions about this, please reach out to your advisor.

The Investylitics team of ATL Global Advisors appreciates your continued trust and support of our process.  We will continue to diligently watch and monitor the markets and economy for any changes that may need to be made, as we continue moving toward a new year together.

Should you have any questions regarding these notes, please do not hesitate to contact Kevin at (404) 788-3539. 

*Investors cannot directly invest in indices. Past performance does not guarantee future results.

*Investments in securities do not offer do not offer a fix rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and, when sold or redeemed, you may receive more or less than originally invested. No System or financial planning strategy can guarantee future results.

Members of the Horizon Advisor Network Investment Committee

  • Jesse Hurst- Impel Wealth Management
  • Clint Gautreau- Horizon Financial Group
  • Brian Toma- Freeman Heyne Toma Financial Advisors
  • Kevin Myers- ATL Global Advisors
  • Nate Ollish- Impel Wealth Management
  • Mike Hackler- Horizon Financial Group
  • Joy Schlie- Freeman Heyne Toma Financial Advisors