Post-Election Landscape: The Economy & The Vaccine

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welcome to our weekly Polaris Podcasts. So I have Jeff Powell with me. So Jeff is our managing partner and Chief Investment Officer of Polaris. Jeff, it’s great to have you. Thank you. And I am your host, Jeremy Witbeck. I am a partner at Polaris, and also a the managing director of the business development group. 

So Jeff, really looking forward to the conversation that we’re going to have today. Obviously, a lot of things have happened in the news with regards to the election and with regard to vaccines. And so really curious to hear your perspective now that we’ve had a little bit of time to digest some of these news pieces that have come as first Can you speak to the election and where we currently stand with the results? Yeah, I mean, obviously, we have Biden coming out over the weekend, when the Associated Press, showing that he did have enough electoral college votes, took an acceptance speech, even though we are right now, even as of November 11, have not heard from President Bush conceding President Bush President Trump conceding his position to President Elect Biden. But yeah, I was. So we had a an acceptance speech without somebody conceding, we still have Trump fighting a lot of things and the courts. But we’ve also had a lot of the courts throw out his accusations of voter fraud, to the level in which if you are actually looking at the overall Electoral College maps, those types of things. And if you’re taking it from a truly neutral standpoint, which I know a lot of people are not.

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Again, one of the things I was talking about is there’s 10s of millions of people every four years that are highly disappointed with the results that come out from an election. And in this case, we had the highest voter turnout that we’ve ever had, I mean, Biden won with 77 million Trump lost with 72, which would have won any other election prior to that, you know, not necessarily from an electoral college standpoint, but certainly from a popular vote standpoint, which is fantastic for American politics, we obviously want to have everybody getting their voice out there. But really the three states that are still contested being Georgia, North Carolina, and Arizona, really don’t even come into play anymore. There are some accusations of Pennsylvania as well, those have actually been put aside. And they’re still also a 50,000 vote count difference. So very low likelihood of enough votes swing there, that wouldn’t make a difference versus having other places like having, you know, Georgia, that’s continued to expand a little bit more towards Biden, but it’s still only about a 14,000 vote differential, which you could see a different swing there. But it really is looking like testings over.

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One of the things that are still not over as the senatorial races, mainly because we have multiple states that require a 50% or higher actual vote count. And when you don’t have that vote counts, then you’re looking at needing to actually do a run off. And Georgia actually has two open Senate seats that are going to an early January run off. We’ll know more about how those election results happen. Once we’re there, but right now, it appears that the republicans hold 56 seats, the democrats hold a 48 if you’re considering also that the two independents align up with the Democrats. And so really what we’re talking about is Bernie Sanders, who if you’re looking at him really as not an independent

4:04
when so again, from looking at it and that kind of context, it’s not looking like

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that we’ll have a blue wave, which is one of the reasons we talked about this before. It’s one of the reasons what the markets really liked, was having a check and balance system. So it’s looking very likely that we will see the democrats hold the Senate, at least for the next two years until we have a midterm election. Yeah, Jeff, I appreciate that perspective. And, to your point earlier, I mean, this was clearly a hard fought election. In fact, a lot of people rose on both sides fighting hard for their candidates. And now that this is all unfolded, do you have any advice for people as we go through future elections, which may be as hard fought with regard to managing our money and not having emotions getting away of their investment objectives? Yeah, I mean,

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I think the key word that you just brought up was emotions, right? I mean, you know, oftentimes, and again, people get a lot different people have different viewpoints when it comes to politics. And politics can be one of those third rail items that you do not want to touch, which could potentially harm a relationship. And we’re not afraid to talk about it, we’re not going to talk about our own personal beliefs. But again, one of the things that we really try to do is to be as agnostic as possible about it. Not to be rad not to be blue, not even to be purple. So not even a moderate, to be translucent. We’ve got to be able to be willing to work with whatever is going on, when we talked to before about kind of having what if scenario. So what if we saw Biden win the presidential election, but not have anything else changed, do not have the senate flip, do not have the house slip. I mean, the pollsters, as we kind of joked about in our last podcast make weatherman and economists look like they’re, they’re fantastic at predicting the future.

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They got it wrong. They thought this was going to be a landslide win, which it was not, they thought there was going to be a blue wave and have republicans lose the House and the Senate or lose more seats in the House and lose the Senate, which didn’t happen.

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It’s so hard to predict. So why take extreme measures when it comes to your money. The other side of it is just because your political beliefs don’t line up with who’s in power, doesn’t mean that the markets may not react positively to it. Obviously, there’s enough people that believe in the things that you don’t, and the situation that push the markets up. So, you know, it’s one of those things where whenever I see extremes, you know, all in all out, you know, they’re the enemy. They’re not the enemy. I mean, they’re bad. And I’m good, you know, black and white is not reality. And so the more that we can kind of look at things and temper them, and kind of find some middle ground, so Okay, I’m terrified about what’s going on with the election, fine. Maybe take just a tiny bit off the table, just keep a little powder dry. But guess what, we’re already doing it for you. So if we really felt like the risk levels were going up substantially. And if the markets were reacting negatively, to what was going on? Are we better equipped to make that choice or you as an individual investor, and it’s not meant to sit there and beat people up? It’s not an intelligence thing. It’s a specialization thing. Now, again, we have conversations with all sorts of highly successful people all the time about what we’re doing, why we’re doing it, everything else that goes into it. It’s not a competition about that. How much time are you spending every single day? What’s your training? What’s the research that you have? How are you making those decisions without it being just a complete gut reaction, that you’re taking it to an extreme. So and I see it on both sides. Jeremy, this is not a republican thing, because Trump lost this election. It’s not a democratic thing. It’s a both party thing. It’s whoever’s in power and power, the other side tends to really kind of go off the deep end. So now that we have a Democrat, as a president elect, we’ve got our republican clients that are complaining, guess what was going on four years ago, we had a complete flip flop of the democrats that we had as clients complaining that Trump was taking office, great complain about it, but at some point, we all have to kind of get behind whoever’s elected, and really try to be as supportive as we possibly can for the betterment of the country. And Jeff, great advice. And on a little bit of a different note, but something I think both sides of the aisle can really celebrate. We had a lot of really good news come out from a few drug companies with vaccines. Do you mind not taking us through some of those announcements and what the potential implications are? Yeah, I mean, obviously, we had one several months ago, which was believe moderna buts the the name of the company that came out and said that they were

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that they had a

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vaccine that was working was was pretty effective, but it was on a very small group of people. And so the markets kind of initially reacted very positively to it, and then kind of let that subside. And just last couple days, Pfizer came out

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and said that not only do they have a vaccination, but the vaccination itself is 90% effective, which is just off the charts incredible. If it’s actually true, certainly a lot of news to digest here in the last couple of days, and it sounds like there’s been a lot of progress made in that front. What are the implications then going into the latter part of this year?

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And the beginning of next year, if it is found that these vaccines have some merits or Yes, on the flip side as well, if it’s found that after their peer reviewed that their results aren’t quite what they were hoping for.

10:12
Yeah, so what we’re looking at within it is I mean, obviously, well, let’s just take a couple steps back, you and I are not doctors, we’re not pathologists.

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What we’re talking about is purely what we’re researching and reading in order to understand the impacts on the economy and everything else that kind of goes along with it. That all being said, normally, if you have like a flu shot, which again, if flu is a virus, if you’ve got something that’s 50% effective, it’s considered to be very good. This is 90%. Effective, this is amazing.

10:51
A, in my reading, I cannot find a sample size on this. So in my research, I don’t know how many people that they’ve sampled. It has been a very quick way of looking at this. And so in dealing with that, part of what we have to look at is, you know, what are the side effects. There was a study that came up that said more than half of Americans are afraid to get vaccinated, because of how quickly these vaccines are coming to market, which is a great thing on one side, and it’s scary as hell on the other, are you going to glow in the dark or worse, you know, as a result of taking the vaccination. So what we want to be looking at within it is the safety behind it. And then really, obviously, we need to get enough of these vaccines if they are indeed safe into the hands of people, you know, first responders, those that are highest risk first, and then work our way through the rest of the population. You’re talking about, you know, it just our country alone, you know, in a neighborhood of probably having close to 400 million injections created, how quickly can that happen? Most people are saying that minimally, you’re halfway through next year, before we’re looking at having immunizations going on in this country. And as we’ve talked about before, you need a 70 to 80% herd immunity before you start really knocking down a virus. So when we have our population fighting masks, and other things are fearful of the overall safety of this.

12:36
I question how quickly the adoption rate will be. And then the other major fear and you and I’ve talked about this in past and we talked about it today is mutation. I mean, these things do mutate. And so we may come up with a perfect thing right this moment. And by the time that we have enough of it to actually start immunizing our population, it’s mutated enough to actually knock it down and not make it as effective or make it ineffective completely. So our I think, really good possibility is it’s certainly a way better than we were a couple of days ago. It’s actually very insightful with how are these doctors are approaching it. So it will be I think, very interesting to see in the end, where we stand come

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summertime of next year. The scary thing is that we’re just seeing rates that are going through the roof right now. And we’re starting to see hospitalization rates going on, I was actually provided a an internal memo from a health care company in the Midwest, that was talking about, you know, it was to their own workers, talking about how scary this particular winter is going to be. How much you know, their hospitals are already filling up, and that they’re very concerned at this moment of what to expect. We had 142,000 new cases yesterday alone, with 1400 deaths just in the United States, Texas,

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which we’ve kind of talked about in the past, has surpassed California as the number one spot, and that one over a million people that have had COVID. And just that state alone, we’re at 10 and a half million, it seemed like less than a week ago, we were just barely going through it. And again, if you’re looking at the escalation of it, I mean, the height that we were at the worst that we were back in June and July, was a little under 80,000 and we’re hitting 125,000 right now. And yes, you can sit there and say okay, well, these are younger people and they can handle it better and everything else. Great. We’re starting to see an uptick in our death rate too. Okay, so again, the seven day average has gone from

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Around 750 to over 1000. And just the last month, that is not a good trend that is obviously a 33% increase. And what we’re seeing there, no one can argue that that’s a good situation. So we are starting to see hospitals fill, even though we know how to prepare people better than we know how to attack this better. We’re coming in to cold and flu season.

15:25
It’s going to be a very interesting winter. Yeah, well, Jeff, thank you for, for some of the statistics, certainly not out of the woods yet. And I don’t think you can be stress enough that when you’re especially out in public, wear a mask, wash your hands, try not to touch your face and do everything you can to limit your exposure because we’re still fighting this virus and the winter months tend to be much harder for coronavirus type viruses with regard to spread and preventing catching. Jeff, any, I guess last thoughts for the audience, before we wrap up for today, anything that you want to leave with for the end of the year or just on investment principles in general? Well, my big thing is just to kind of repeat a couple of things, you know, a, let’s not go to extremes when it comes to elections. I mean, obviously people have their viewpoints, it’s why we vote, it’s why it’s called a democracy. And again, 50% of the people that are voting, on average, or let’s just say 49%, to be a little bit more accurate, are not going to be happy. And this case, it’s 47% of the population, that’s not gonna be happy with them results.

16:40
And that’s okay. You know, that’s why you vote, you don’t get to get your way all the time. And, again, four years ago, would be a perfect example of how that flip flopped. And we’re also, you know, again, so we’re, we’re going to be going through a transition, we’re going to watch how that transition goes, we’re going to hopefully see

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a check and balance within our political system, because technically, we could still see a stalemate inside of the Senate. And if that was the case, then all tie breaking votes would go to the Vice President, which is obviously a Democrat. So therefore, you would see the senate country being controlled by the Democrats. So the republicans in early January need to take one of these two states see it’s or Georgia State seats and the Senate race, in order to have that check and balance system that I think is a real necessity. If Biden is really true with what he’s saying, and he wants to bring Americans together. I think that that could be a very interesting thing as well. So really, we haven’t seen that since President Clinton, whether you liked him or not. He was actually the last democratic president to really work side by side with the Republican Party. And, you know, again, really have some compromises going on. So Biden talked about, you know, that we’re not Democrats, we’re not Republicans, we’re Americans, and that we need to be working together and put the divisiveness aside, hopefully, that’s the case. And if that is the case, you know, maybe we do see some very good things come out of the next four years of having him and Kamala and office. My personal belief is, regardless of your political ideology, is you’ve got to give the person that just got elected a fighting chance at what’s going on.

18:46
And so we will have a new president come January, I think that it’s important for us as a country, to stop trying to be as divided as we are, and try to side behind, you know, making things work better for all via a black lives matter movement via a coven taking a disproportion about minorities

19:10
in both hospitalization and death rates, and a lot of that due to living conditions and, and really where they kind of shop and everything else. It was a Harvard study that just came out showing why they felt like it was more of

19:28
an impact and even things like a grocery store. For someone who is of lower income tends to be a smaller shop more crowded. And as a result, they’re staying longer in a crowded space than somebody that is from for more affluence, which is leading to again, higher numbers, you know, again, what they’re saying is crowded, enclosed areas. So to your point Jeremy masks are essential. This masks are

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Science. This is not a political statement. It’s simple science. It’s why we gave out mass to our clients. We felt like it was, again, we’re trying to protect them from, from bad things going on in the markets. And we’re trying to help them from bad things going on in our environment right now. So the biggest thing out there that I would throw is, again, politics. Let’s get it out of our lives for a moment. We’ve had enough of it for the last several months. Let’s come together as a group, let’s make COVID a non political thing as well. And hopefully, we’ll have that wrapped up sometime in the next year so that we can go back to more of a life as we have grown used to it.

20:43
Jeff, well, thank you very much. Certainly a solid bias for what’s been a crazy time so that we’ll go ahead and wrap up so I appreciate everyone for listening to us and as always, be safe and be healthy.

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