Page 6 - ISQ October 2020

INVESTMENT STRATEGY QUARTERLY

Race for the White House: The Home Stretch

Ed Mills, Managing Director, Washington Policy Analyst, Equity Research

We often receive questions about the impact of elections We view the following outcomes as the most likely composition
on the stock market. In reviewing the historical analysis, of government post-election:
we have seen periods where election outcomes have
caused short-term volatility, but more importantly, we Democratic Status Divided
see that this volatility generally quickly corrects itself. We Sweep Quo Government
track what is going on in Washington because it can have
White House
extremely important market implications, from both a
macro and sector-specific outcome, but above all, we
House of
always remind investors to not overreact to near-term Representatives
swings in the market created by Washington activity.

As it relates to electoral outcomes, I know this can be an Senate
intensely debated topic, so we will leave that for voters to
decide. However, we will address what each of the most likely
post-election scenarios mean from a policy agenda and what As we think about the potential impact on the markets, we
impact they may have on the market. Additionally, we want to believe it is extremely important to avoid overly broad or
cover some of our bases with some potential ‘curve-ball’ sce- sweeping conclusions and have a discussion of what might be
narios (remember this is 2020 after all). different this year versus previous elections. Any discussion of
the election has to recognise how important DC has been to the
markets since the outbreak of COVID-19. We are in the middle of
the largest fiscal and monetary experiment in the history of the
The ability to enact a legislative agenda is world. The economic recovery and market reaction will be tied to
correlated to who holds a majority in the House the health aspects of the pandemic, and also to how much addi-
and Senate.
tional support is provided by Congress (fiscal) and the Federal
Reserve (monetary). Finally, we will be paying close attention to
the makeup of Congress, as the ability to enact a legislative
agenda is correlated to who holds a majority in the House and
Senate.

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