Congressional Power Matters
Once again, the pollsters made Weather Forecasters and Economists look good. They did predict that Joe Biden would win the Presidency. But they also predicted that the Democratic Party would take over control of the Senate and that they would take between 15 and 25 additional seats in the House of Representatives.
The Republican party picked up 8 seats in the House and it
appears that they will retain control of the Senate. There will be a runoff for both Senate Seats from Georgia, which requires candidates to win 50% or more of the vote. It is predicted that both Senate seats will go to Republicans when the runoff election occurs in early January. This would give Republicans a 52 to 46 (with two independents) majority of the Senate.
A balance of power is important in government, so one side can’t simply “railroad” their laws and agenda down the public’s throat. Better yet, the stock market has had its best historical performance when we’ve had a Democrat as President and a split Congress. If the Republicans can retain control of just one of the two seats that are still up for grabs in Georgia, we will be set up for what historically has been the best performing combination of power (see chart below).
Transition of Power
Whether you voted for him or not, Joe Biden will be the next President of the United States. It is time for President Trump to acknowledge that he didn’t win the election. The president has waged numerous lawsuits in several key battleground states. Two states have dismissed all of his claims, one denied all of his claims, and Trump’s legal team has dropped claims in two other states. To date, not one judge has sided for any of President Trump’s lawsuits or allegations. Georgia is the only state conducting a statewide recount due to the fact that there was less than a ½% difference between Biden and Trump. The recount is supposed to be completed by November 20th.
President Trump’s refusal to acknowledge President-Elect Biden’s win and his refusal to allow his staff to begin the transition process could disrupt the transfer of power and leave President-Elect Biden’s team deprived of important information to make important decisions early into the regime change. Former President George W. Bush, the only living former Republican President, has already publicly congratulated former Vice President Biden on winning the presidential election. Other high-powered Republicans, including Mitt Romney, former Florida Governor Jeb Bush, and Maryland Governor Larry Hogan have called upon President Trump to concede. And 31 former GOP lawmakers signed an open letter urging Trump to concede, saying “Every vote should be counted and the final outcome accepted by the participants because public confidence in the outcome of our elections is a bedrock of our democracy. Going forward, it is our hope the nation will, regardless of party or persuasion, recognize President-Elect Joe Biden has won this election.”
It is my hope that President Trump will soon concede and begin a smooth transition of power to President-Elect Biden. Any attempt by President Trump to remain in power past January 20, 2021 would be considered a coup d’état.
What to Expect in 2021
We do expect President Trump to concede and to transition power to President-Elect Biden soon. We don’t expect any issues with this transition of power in January. This alone could give the markets a temporary boost because it removes one more unknown.
We haven’t had a calm market since 2017. While we don’t expect 2021 to be as trying of a year as 2020, we expect 2021 to get off to a slow start as the economic impact of SARS-CoV-2 spills over into the new year. Most experts are predicting vaccines will be publicly available at the end of Q1 or the beginning of Q2 2021
Unless we experience some sort of setback in vaccine distribution, we expect the economy to end the year strongly. We see the Fed being accommodating throughout 2021. And as long as the Republicans keep control of the Senate, we don’t see any tax increase in the near future.
A Season of Thanks
We aren’t done with 2020, but as we approach the holiday season its always a great time to reflect on the year and give thanks to those around you. First, I’d like to thank all of you, our clients, for your trust and your loyalty to our firm. It has been an incredibly trying year, but I feel that this year allowed for us to demonstrate the value of tactical investment management. By showing you how we protect against downside market risk and showing you how we step back into the markets as risk subsides, has deepened your trust in us and also deepened our relationship together.
I feel that Polaris Wealth is a stronger and better firm today than it was at the beginning of the year, in part because of you our clients. But Polaris Wealth wouldn’t be Polaris Wealth without the dedicated team that tirelessly works every day to help you accomplish your long-term financial goals. I can’t tell you how proud I am of this Polaris Wealth team. All of them had to juggle the same fears and anxieties, family obligations and responsibilities that shifted in a “work from home, learn from home” environment. Instead of stumbling through this transition, Polaris Wealth flourished. I will always be thankful and proud of how we handled this year.