Georgia Runoff Elections

Control of the Senate is at stake. The candidates have shattered spending records.The Georgia Senate race holds far-reaching implications.

 Jeff Powell, CIO, Managing Partner & Founder of Polaris Wealth & Jeremy Witbeck, Partner at Polaris Wealth, discuss market and policy impact of Georgia Election results.

Jeff Powell

Jeff Powell

Jeremy Witbeck

Jeremy Witbeck

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Jeremy Witbeck – 0:04
Welcome, everyone to our Polaris Podcast. I am Jeremy Witbeck. And we have our managing partner and Chief Investment investment officer with us, Jeff Powell. Good morning to you.

Jeff Powell – 0:15
Good morning. How are you?

Jeremy Witbeck – 0:16
Yeah, doing really well, obviously was a late night last night with the Georgia Senate race and think things went a bit differently than what we had expected several weeks ago, although there are certainly some trends that were emerging, but wanted to spend a little bit of time and go through kind of your thoughts and what the potential implications are without the senate race ended up in Georgia?

Jeff Powell – 0:44
Well, it looks like we’re still waiting on a little bit of stuff going on. And for the record, I just want to reiterate, you know, what Polaris wealth advisory group stances when it comes to politics and talking about politics, you know, we don’t want people to read into the messaging of what we’re dealing with here. What we try to do with with regard to how we deal with politics is to be agnostic to it. We have lots of clients that are Republicans, we have a lot a lot of clients that are Democrats, they fill the entire bell curve of thought process and and feelings about what’s been going on with the election. So just to avoid potential comment back to us with regard to this, what I really want to do is just say that we’re being very clinical with our talking about this. So if you went back to actually the election in November, the runoff occurred, because the state of Georgia has a must get more than 50% of the vote in order to win a particular seat. For the US Senate, no one in the two seats that were there, got that 50% margin. And so we had kind of an unusual situation, which was to have an election completed, but not really completed. And so we had, again, just to bring everybody up to speed. In one case, we had two republicans and one democrat running for one seat, and then it was a Republican and a Democrat running for the other. And there was enough other independent party members and other parties that took enough votes so that nobody got a majority. With that all being said, originally, right out the gate, it looked like the republicans would take both seats, and control the us senate with a larger margin and when it was originally trended before the the presidential or the national elections with both presidential Congress and senate going into voting cycles. But what we’re seeing right now, at least, as we speak, it looks like we have at least one if not both seats going to the Democratic Party, which would be a material change in control of the US Senate, which is really why this is becoming a much bigger deal. So one election with 98%, and has Warnock winning over a law for which, again, is enough of a margin, that also Purdue election, you’re talking about a total of four tenths of 1% difference, that election has not been called yet. That being said, also is leading in this situation, which is again, the Democratic candidate, not the incumbent, Purdue, who would be losing that seat in this situation. So we are in a circumstance where if that were to go through, that the democratic party would have control over the US Senate.

Jeremy Witbeck – 3:58
And Jeff, can you elaborate a little bit on what that means when you say that they have control and why this race was one that was especially closely watched?

Jeff Powell – 4:08
Yeah, so I mean, if we’re really looking at, you know, it’s just kind of the historics. I mean, if you’re looking at it from just a baseline, when you’re looking at it, this kind of context, how to, we’ve had over the last 1520 years, parties voting on party lines, much more. So we’ve had it from a historical standpoint. So having the republicans controlling the us senate is important in one context, which is that they could veto or shut down anything that was being nominated. And we have bills, tax reform, laws, those types of things that were coming up through the house, that could be shut down by a republican controlled senate if they felt like it wasn’t in the US. public’s best interest. So having one party controlling the presidency, controlling Congress, you know, both the House and the Senate is a very big deal. And had we had something that we have not seen for some time. And so really that’s that’s the big dramatic out of this is saying, Okay, well, what does this really mean, to sit there and see this? And again, it’s something that we’re looking at looking at closely, because we want to understand the implications that I might have on taxes on our future laws.

Jeremy Witbeck – 5:35
Thank you for kind of clarifying that. And some of the comments that that I’ve received, I’m sure others is what is the stock market going to do if it ends up going to the democratic side, just because of the shift in power? And yet here we are this morning and stock markets not down? In fact, it’s actually up and it’s up? pretty significantly getting back to the recent all time highs. Do you have any thoughts or comments regarding that and why the market seems to be reacting the way that it is?

Jeff Powell – 6:05
Well, I think that to your exact point, Jeremy, when most people thrown out the initial run up in the markets back in November, as the fact that the Republican Party did much better in the election than was originally projected. If you look at Congress, or the House of Representatives, in this case, the production was for them to lose between 10 and 20 seats, which didn’t happen, they picked up seats. And so all of a sudden, you know, this, this huge blue wave that was being projected, really was a misinterpretation of information at the very latest. With this, I mean, again, the the thought process was that the that the Democrats, were going to not only take this setup, but they were going to take it by multiple seats more than what ended up happening. And then all of a sudden, the Republicans had a shot at keeping a hold of the of the Senate, the markets reacting today. I think that a, a the markets have had some time to kind of reflect on who Joe Biden might be as President, they’ve also had a chance to kind of reflect on who did when, and where they kind of fit in the full scheme of conservative to liberal within each party. And I think that what you’re seeing is that there’s enough conservative democrats that have been elected or are currently sitting in the Senate, that the thought behind it is that if there’s an egregious bill put forth for a bad tax bill, that the democrats that are sitting in the Senate will vote for it. So as much as it looks like the republicans may lose control of the Senate, it’s looking like there’s enough rationalization out there for people to be voting based upon what’s better for the US, versus just something that’s along party lines.

Jeremy Witbeck – 8:08
Jeff, that’s a great point. And I think it’s something that we oftentimes think forget about is that just because you have a majority on one side or the other, that doesn’t mean that there’s a free rein to pass anything. I mean, as you were speaking as remembering back to the first two years of President Trump’s presidency, where he had the majority of senators on the Republican side, and then he was trying to pass his health care reform, yet that never really happened, didn’t materialize. And so I think what you’re saying is a great reminder that just because a party has majority, it doesn’t mean that the senators aren’t beholden to their constituents. And depending on the basis that they ran, and the the desires of people on doesn’t mean that they’re just going to pass anything through that that comes along. And so that checks and balance system still works, even when you have one party having control or another.

Jeff Powell – 9:00
Well, you would also brought up in private conversation, Jeremy and I thought it was a an excellent point that I think is worth bringing up here, which is also some of these democrats are being elected and what has historically been republican strongholds. And so the way that they’re gonna win a majority and those kind of strong rules is by being much more moderate or even conservative in nature, even though they might have a blue sign behind them, or a different emblem than the dumb or the Republican Party, doesn’t mean that they might not vote more like a Republican and a Democrat, because of their constituency, and the fact that they are trying to, to, you know, hopefully represent the people that are that have elected them in a way that would be right for them rather than just again along party lines.

Jeremy Witbeck – 9:53
And it will certainly be interesting to see how that unfolds. And Jeff in previous conversations, and may have even done On one of these podcasts, but I think it’s a point that’s worth emphasizing here and you’ve talked about the split and how no matter what happens, half of the population approximately will be happy, the other half will be unhappy. Do you mind elaborating on that a little bit on why it’s important to keep that in mind and not to take extreme music, especially when it comes to money? with things like this?

Jeff Powell – 10:21
Yeah, I mean, you know, again, I think that one of the things that we’ve seen go on over the last, at least five, if not more, like 15 years is more of a polarization of belief systems. Some of that is through the media, some of that is through the internet. And, again, there’s been a lot of controversy based upon what information flows being disseminated to different parties, there’s a, an interesting documentary that kind of goes through all of that, where basically, the internet feeds you with information that you want to read, not necessarily what’s out there. And obviously, you know, the truth is very hard to to truly disseminate. Because the truth is based upon, you know, not only your belief system, but it’s also based upon what other people have written about. And when you really kind of get down into perception and reality, there is no real reality, and reality is what you make of it yourself. When it comes to making decisions and making decisions for your investments, one of the things that we continue to reiterate with our clients is to just be clinical about it. If you are a Democrat, then you’re probably happy with what’s going on right now. That being said, four years ago, these were the same people that were complaining the most about what was happening with Trump being elected. Right now, Republicans are very unhappy. And in some cases, seeing is acting and more of an extreme nature of decision making, saying, Okay, well, should I do you know, what, x, you know, should I go completely to cash, should I go and get out of the markets and so on? No, you shouldn’t, I mean, within any market, we will figure out how to be able to make money doesn’t matter if it’s a Republican or a Democrat, there are things where money will be spent within the government, there will be initiatives that will be occurring, where we, as professional portfolio managers, will be able to sort through it and make decisions based upon what we think is in the best interest of our of our client base. And keeping in mind that in my previous writings, the best of possibilities was having a democratic president with a split Congress, and it’s looking like that’s not going to happen. But that does not necessarily mean that the the returns will be negative. In fact, having a democratic president across the board with all of this has historically produced positive results for the stock market, and about 45% of the time, you will have a democratic president. So are you going to invest and not invest for the next four years, because we have a democrat sitting in the White House? That doesn’t make any sense to me. So it’s about navigating what the agenda of whatever political party is in power at that time, be it one that you agree with, or one that you don’t agree with. But it’s got to be something that you can sort through to be able to find where your money would be best served in the markets in a clinical way, so that you can take advantage of it?

Jeremy Witbeck – 13:35
Yes, I think that’s a, that’s a great reminder to all of us. And I mean, just to kind of harp on something I said before extreme views, especially when it comes to portfolio management, almost always the wrong way to go. And I think the results in the market this this morning, at least preliminary results are a great reminder that that you know that there was a knee jerk reaction that say step out, things are going to crater. And here we are with that balance of power not being as as fully balanced as people had hoped for at least some people have hoped for. And yet the markets doing just fine. And I think sometimes we forget that, at the end of the day, the stock market really is moved by are companies able to make more money. Right. And certainly the President and Congress set the rules that companies have to play by. But one of the things I’ve learned is that companies are pretty nimble, and that they find ways to navigate around obstacles, and they find ways to take advantage of opportunities. And certainly, with the changes taking place. Both of those will be present. And I think most companies feel pretty confident going into the future. This is probably not a fair question, but I’m going to ask it anyways. Any projections or any things that you’re thinking about as we head into the political landscape for 2021 within the portfolios?

Jeff Powell – 14:52
Well, I’ll throw out a teaser for you and that is we have a webinar coming up here a week from today. Today at noon, Pacific time, and we will be going through a lot of where we think things are going to be going in 2021, we will do a nice recap of what we’ve seen go on and this past 2020 year, and where things we project will be going, I will give you a small hint to a little bit of it, which is that we expect the leadership change to happen, not only, I mean, obviously, we are having a leadership change within the White House, but we expect there to be some shift in leadership with regard to what will work in 2021 more than the markets, and it’s not going to be what worked in 2020. So I’ll just tempt you with a you’ve got to come and come gotta come to our webinar, and or read our next educational piece to get the full gamut of what we think is gonna be going on with 2021.

Jeremy Witbeck – 15:54
Yeah, Jeff, that sounds like it’s gonna be really interesting for our listeners, how they find out information on how to attend.

Jeff Powell – 16:02
So coming up here, I believe that will be going out today, that they will get a save the date, and then they’ll get a direct email a couple days before the event itself, we will most likely also have a direct link on our website, also. So that they’re going to the website to try to find the information out to log on, that’ll be sitting there for them. So it should be pretty straightforward, pretty easy for them to do things. But yeah, I mean, we should have a very good attendance, we should have, you know, come come view it. And if for some reason, you’re not able to attend it live, it will be recorded. And it will be on our website probably a day or two after we’ve gotten done recording the actual webinar.

Jeremy Witbeck – 16:50
And Jeff, well, I’m excited to hear what you have to say. As always, I’m sure there will be a lot of material that that you’re able to cover with us. And so really appreciate you taking the time and helping us understand kind of your thought process as we go through these things. Any last thoughts or comments before we wrap up for today?

Jeff Powell – 17:10
Yeah, I mean, I guess the the biggest thing that I would remind everybody is, you know, even within Polaris, I mean, we have lots of Republicans, we’ve got lots of Democrats. I mean, we’re we’re the full gamut of it as well, within a firm. I’ve certainly had lots of people try to guess what political ideology I have. Certainly not something that I will give up in a public forum. But just realize that again, for me, when it comes to the actual investment management of our accounts, I’m not read, I’m not blue, I’m not even purple, which would be kind of in between, I have to be translucent, I’ve got to be absolutely see through to be able to take advantage of what’s going on and to set my own political beliefs aside, and to kind of face whatever realities we’re facing in the most clinical well thought out way as possible. The sources that we pull from are a variety of both domestic as well as international sources of information. We took from conservative standpoints predict from from liberal standpoints we take from international in order to be able to get as much clarity to what’s going on within the markets not necessarily read what we want to read out of what’s happening within the market. So I would encourage our client base to think globally also, when it comes to how they view what’s going on with the current environment, because what we are dealing with, or things that we’ve never seen in our history before. So again, deep breaths, you know, we’re all Americans, we’re all on the same side, we’re all wanting the same thing, which is for this country to move ahead and move ahead in a positive light, just realized that we’re we’re all playing on the same team. So. So with that said, you know, come to the webinar, enjoy what we have to say you may not agree with it all. But realize that it’s being done in the most clinical well thought out way that we possibly can.

Jeremy Witbeck – 19:08
Jeff, thank you so much for your time again, and really enjoyed our conversation. And so to all the out there, as always be safe, be healthy. 

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