A Year to Remember
(or Perhaps Forget)
The markets gyrated for a little over a week, dropping about three percent during that time period, because investors feared a disruption in technology production could impact several large U.S. technology companies. No one feared this virus turning into the worldwide pandemic that we know today. Most experts believed this coronavirus would be contained just like SARS was contained in 2003, the Bird Flu in 2004, Swine Flu in 2009, MERS in 2012, Wild Poliovirus in 2014, Ebola in 2014, and the Zika virus in 2016. In each of these cases, there was a knee-jerk reaction, and then the markets quickly recovered their losses.
The S&P 500 – March 4, 2019 – Feb 18, 2020
With fall came political campaigning with the culmination of our national election on November 3rd. Many pollsters predicted a “Blue Wave,” predicting that the Democratic party would win the presidency, the senate, and the house. We still don’t have complete clarity on how the full election will be recorded.
Despite dozens of attempts to overturn election results by the Trump administration, Joe Biden will be the 46th President of the United States. While the pollsters predicted the Democrats would take 10-20 additional seats in the House of Representatives, they lost eight seats. And odds are that the Republican Party will win at least one of Georgia’s two U.S. Senate seats that are both going to a runoff on January 5, 2021. Both seats are held by Republican incumbents, and both are predicted to hold their seats. If this comes to fruition, Congress will be split, which the markets have looked at favorably.
As we’ve written, the markets historically have performed better when power is divided, with the best market performance when there is a Democrat as President and a split congress. This is exactly what we will have if the Republicans can hold on to at least one of the two seats up for grabs. It wasn’t surprising to see the markets rise on this news.