We are a few days past election day and they are still counting votes across the country. There are a handful of states that are too close to call for the presidential race. Even with the counting done, there will be lawsuits, recount requests, etc. so a confirmed winner may not be known for a while.
The stock market, after having its worst week since the spring, is on track for its best week since then. Many investors are confused as to why. The consensus reason is based on the likely outcome of the elections and the resulting change in party representation on Capitol Hill and in the White House.
As it stands right now, the Senate will remain in the hands of the Republicans, the House of Representatives will still have a democratic majority, and there will be a democrat in the White House. The markets interpret this as no major changes in tax laws and corporate governance. The stock market likes this because it removes uncertainty. With the government out of the way, investors can focus on how companies s are doing without having to guess if Congress will move the goal posts.
Regardless, well run companies adapt to changes in government, so if you believe in the management of the companies that you invest in, you should not worry about what political party is in control of any branch of our government.
Also, if we can get control of the pandemic and get a vaccine distributed sometime next year, stocks should respond positively, and it will not matter who is in DC.
Stay safe, have a great weekend, and let me know if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
